Europe could profit from early climate protection even if no other countries join in, according to the RECIPE study published by Allianz and WWF. But here is the catch: we have to act before 2020 to make any meaningful impact, and some industries will suffer while others prosper.
 | Picture Gallery (click on the image to start)Ten things we have to do by 2050 to save our climate (Photo: Reuters) |
Global warming is a peculiar force. It doesn’t just change the climate; it also blurs the boundaries that once seperated the good guys and the bad guys in the battle against climate change.
The utility Duke Energy, for example, is one of the biggest emitters of carbon dioxide in the already carbon-heavy United States. But its former CEO Paul Anderson had been lobbying for years for a mandatory carbon tax that would help cut CO2 emissions and render electricity, Duke’s central product, more expensive.
It’s a surprise at first, but there is business logic to this strategy. Global warming, Andersopn argued, is here to stay so we better tackle it with a uniform approach. “We can’t afford a patchwork of inconsistent state or local regulations that will complicate and increase the cost of compliance,” Anderson said.
His successor, James Rogers, figures among the most active members of the U.S. CAP (United States Climate Action Partnership). Major companies like Nike or Apple thought along similar lines when they decided to leave the U.S. Chamber of Commerce over the association’s reluctance to fight climate change.
While attitudes in the U.S. are changing, governments in Europe seem to be backtracking from their former climate leadership. In the run up to the critical UN climate conference in Copenhagen, fierce fighting broke out among EU members over how to finance the massive technological and economic transformation needed to make a dent in carbon emissions.
Yes, the numbers are frightening. Creating a low-carbon energy sector only will cost some 400 to 1.000 billion dollars annually until 2030. Billions more will have to be sent to poor countries to help them cut carbon emissions. The EU disagreements, however, misses a crucial point: doing nothing will be even worse.
Sir Nicholas Stern, head of a team of economists and climate scientists created by the UK government, was one of the first to put a price tag on climate action. In 2006, his Stern Report on the economics of climate change put the costs for meaningful climate action at 1 percent of global GDP annually, if we act immediately.
Two years later, Stern increased this estimate to 2 percent. Climate change was advancing more rapidly than expected, he said. Doing nothing, however, would cost an awful lot more, Stern said. Up to a fifth of the world's wealth could be destroyed by unmitigated climate change
 | RECIPE Study (click on the image to open)Download the entire synthesis report of energy and climate policy in Europe |
But no shinning knights have come forwarded to foot the bill. This is where RECIPE, the Report on Energy and Climate Policy in Europe, comes in. Starting from Stern’s conclusions, the authors looked at climate costs for different regions and industry sectors.
Carbon countdown
RECIPE is based on a simple calculation: we can emit some 750 to 1000 gigatons of CO2 until 2050 if we want to have a fair chance to limit global warming to a manageable 2°C increase. Everything beyond 2°C, scientists say, will provoke catastrophic climatic changes.
The authors, led by Ottmar Edenhofer, chief economist of the Potsdam Institute for Climate Impact Research and an eminent figure at the UN Panel on Climate Change, started to dole out the remaining carbon budget to different industry sectors and regions. They developed three different scenarios of how a future world could look.
In one scenario climate protection could be driven by new, low-energy technologies. Another scenario was based on the assumption that technology won’t do the trick, so we have to decrease our energy consumption massively.
The models are of great complexity, but all come to similar conclusions: climate protection is doable. Europe, for example, will profit from early and aggressive climate action even if other regions continue to hesitate. The window of action, however, closes in 2020.
“The key to affordable climate protection is to create binding political conditions to take effect immediately for the coming decade,” says Ottmar Edenhofer. “For Europe, getting an early start on comprehensive climate protection, even unilaterally, will pay for itself through significantly lower costs.”
Power plants, for example, have a life-cycle of several decades. Coal power plants built today will be around until the middle of the century. If Europe, or any other region in the world, stops investing in such carbon-heavy infrastructure, it faces higher initial costs but will avoid expensive refurbishing in the future.
The costs of such climate protection are manageable, RECIPE finds. Offset against the benefits of economic growth, the difference is only one year of delayed economic growth for Europe by 2050. And this does not take into account the costs of negative climate impacts that would be averted.
Impacts on the Economy
What is more, private business can bare most of the costs. “But the willingness of our customers to invest depends upon reliable conditions,” says Joachim Faber, board member of Allianz. “It is now up to governments to provide these conditions.”
RECIPE also offers advice that could help turn other bad guys of climate change into climate protectors. Here is a low-down for CO2-intensive sectors of the economy such as energy, industry, transportation, and agriculture.
Energy production: A complete decarbonization of the energy sector before 2050 is essential and doable, if renewable energies and carbon capture and storage technology become available worldwide. Investments in conventional coal-burning power plants must cease. Nuclear energy can contribute substantially to emissions abatement, but it entails specific risks and barriers that are not fully accounted for in the models.
Transportation: Transportation-related emissions continue to rise, so their importance relative to other sources of emissions will increase over time. Developing and implementing electromobility or sustainable biofuels will be crucial for cost-efficient climate protection. But these technologies are still far from being competitive. More research will be needed.
Industry (cement/steel): The cement industry is among the most carbon-intensive sectors of business, but the potential for increased efficiency is limited. The life cycle of existing plants ends after 2020. The following investment cycle will be critical for comprehensive decarbonization at low costs.
Agriculture: Agriculture is responsible for large amounts of nitrous oxide from fertilizers and methane from belching animals. Reducing these emissions will be crucial. Farmers, however, can contribute to climate protection if they carefully exploit soil and vegetation as carbon sinks.
editor: Thilo Kunzemann
publishing date: November 3, 2009
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