Welcome to the age of the air grab.  

 

We are all familiar with the concept of the land grab, whether at a local or international level and history relates how armies and lawyers have fought over claims staked in the sand.   Now air is up for grabs and specifically the space to dispose of waste from the use of dirty fossil fuels to power and grow our economies.

Our atmosphere is the dumping ground for greenhouse gases (GHG), mainly CO2 coming from the combustion of fossil fuels which provide most of the energy we need to drive our economies.  

Scientists tell us that we have space for about 1,000 billion tonnes of CO2 equivalent (CO2e) in our atmosphere if we are to have a reasonable chance of limiting average global temperature increase to 2⁰C.  From around the year 1800 to date, we have emitted more than 500 billion tonnes of CO2 and the equivalent of about 200 billion tonnes of CO2e in the form of other gases and pollutants. We currently emit around 10 billion tonnes of CO2e per annum so at the current rate, we will fill the available space within the next 25 to 30 years. 

In other words, there is space for about 300 billion tonnes of CO2 up for grab by all of the world’s nations, and they have been invited by the UN Climate Talks to state how much they want to grab.  

The UN Climate Talks are heading towards an outcome in Paris whereby countries will define their contribution to efforts to reduce total GHG emissions i.e. define their share of the atmospheric space to be used between 2020 and 2025 or 2030; except there will be no formal review of targets, no formal adding up of targets and comparing them with the available space ((and no formal monitoring and reporting of performance.

There should be strict rules for this air grab, but there aren’t. 

This is a classic tragedy of the commons. Whilst collectively we all have an interest in controlling the use of the common good (our atmosphere) it is in no individual country’s interest to do anything about it – so each individual country will grab as much as it can.  

Why Are Governments Not Solving This Problem?

 

The fact is, they aren’t able to. Some of the most powerful statesmen in the world have tried to address climate change and failed. President Clinton signed the Kyoto Protocol but Congress would not ratify it. President Obama currently faces similar obstacles. Governments in Canada, Australia and Japan, who all ratified the Kyoto Protocol, dropped out or reneged on their commitments for a range of dubious reasons. The fact is, addressing long term impacts in far-away places is not a vote-winner. Politicians and the media like to focus on near term issues – bombings, murders, what pop stars are up to, and sometimes education and the economy.   

Solving This Tragedy Of The Commons In Three Steps

 

What can be realistically done?  Here are three suggested steps that need to be taken by financial institutions, the carbon markets and you, the general public. 

First, financial institutions, particularly pension funds, insurance companies and sovereign wealth funds (“the money” – which together control the majority of the world’s capital) have a duty to take a long term view. In marked contrast to Governments, they can ignore short term issues. We are already seeing institutions move away from fossil fuelled assets through initiatives such as Divest and more subtle changes in the cost of capital for emission intensive technologies.

The money should therefore send a very clear message to both Governments and corporations that it will incorporate climate risks into investment mandates, thus increasing the cost of capital of fossil fuel extraction and consumption.

Second, carbon markets are critical because they provide the signal which the money can follow. Unfortunately, our early experiences with carbon markets have lead us into a dead end. The Kyoto Protocol, created and negotiated by Governments, was based on a mantra – a tonne is a tonne.

This seemingly obvious statement holds true in physical and political terms but in economic terms, a tonne in Japan is most definitely not the same as a tonne in the US. The economic value which an economy can derive from a tonne, and critically the cost of NOT emitting that tonne, is what matters.

If we want to trade carbon assets, we need Governments to create the markets and then step away, leaving independent institutions to run them (see What Might Carbon Markets Post 2020 Look Like?). A big part of that process is recognizing the environmental value of units so that the market acknowledges countries which set ambitious targets and pays more for their units compared to countries which set low levels of ambition. Switzerland just announced ambitious climate targets, but these won’t count for anything if they meet them by buying junk carbon assets.

Third, the general public needs to make its voice heard.

400,000 people marched in New York at the Secretary General’s Climate Summit in September 2014 and yet the US has long been seen as one of the laggards on climate action. This paradox highlights the fact that Governments continue to fail to convert scientific information and public interest into effective climate policy.

We need to get behind clean energy, low carbon technology and sustainable development. Here’s a link to a new program that can help achieve some of those goals. We need to say no fossil fuel subsidies and think about future generations. It is massively in our interests to see action against climate change now rather than in the future because, among other things, the sooner we act: the cheaper it will be; the greater our chances of limiting the extent of the change; and the sooner we will reap the multiple benefits of low carbon technologies (reduced air pollution, increased energy security, benefits of the green economy).

The air grab is inevitable. However, atmospheric space is limited and emitting GHG is a right for which emitters should pay dearly.  Voters must therefore hold Governments to account for how much space they claim (i.e. how many sovereign assets they create) and what they do with that space (i.e. who they give those sovereign assets to and at what price). With a meaningful carbon price, we won’t trash the atmosphere and clean technologies will progressively displace dirty fossil fuels.