Has the US election thrown a spanner in the climate works?
The morning after the US election, the International Emissions Trading Association (IETA) held a briefing at COP22 to discuss how the result might affect both US climate policy and the global climate process including the Paris Agreement.
The fact of the matter is no one knows. Climate change was not one of the central issues in the election campaign. In fact, it was barely mentioned. We know that the President-elect has questioned climate change, expressed hostility towards the Paris Agreement and promised to support the coal industry. However, we don’t yet know how the campaign rhetoric will or will not play out into policy.
In my role as an advisor to KPMG clients, I take a fairly sanguine approach to all this.
My view is that the international fight against climate change is a long term challenge and has always been a stop-start story as it negotiates the complexities of global politics. It will continue to hit hurdles as governments of varying views and political colours come and go. Yet progress continues – albeit on a “two steps forward, one step back” basis. I fully believe that the world remains on a path towards a low or zero-carbon global economy at some point around the middle of this century and that business leaders need to prepare for that today. Let me briefly explain why I am confident on this point:
Firstly, the climate change problem won’t go away, it will get worse. The scientists will continue to provide more and more compelling evidence. The environmental and social effects such as extreme weather, water crises, migration and social unrest will be felt increasingly severely all over the world. It is going to become more and more difficult, if not impossible, for any major economy to ignore it.
Secondly, the Paris Agreement has been agreed by 195 countries and already ratified by more than 100. The world’s largest emitter, China, has seen the effects of climate change and extreme fossil fuel pollution on its own people. China will continue to address climate change and develop its clean energy economy as will other countries. Any major country that pulls back, will find itself increasingly out of step with the rest of the world. Climate inaction will become a bigger and bigger issue in international politics.
At the same time, as I wrote in my previous blog, climate action is not just about action by national governments. State, provincial and city governments the world over continue to take action and address climate change on a sub-national level. Forward-thinking businesses, such as those that have already committed to 100% renewable energy and science-based carbon targets, will continue on the path they have set.
Thirdly, clean energy market forces are in play and are ultimately unstoppable. They will continue to drive the development of low-carbon energy generation, as solar and wind become more and more cost effective, supplies of cheap natural gas continue and high carbon coal becomes a more costly option in comparison. As one of the speakers at the IETA event said, it is not the environmentalists that are killing off the coal industry in many countries, it is the availability of cheap natural gas. Furthermore, low-carbon innovation will continue to accelerate. The auto industry, for example, will not suddenly abandon its transition to electric vehicles. Developers will continue to work on effective ways to store and distribute solar-generated energy. Technology will continue to take us forwards.
Fourthly, the financial sector – investors, lenders and insurers – are becoming increasingly cognizant that climate change poses real risks to the financial system. They will continue to pressure businesses to be transparent about these risks and, as data becomes more easily available to analysts, they will increasingly factor climate considerations into their investment, lending and insurance decisions. Businesses will have to respond.
Finally, just as the problem of climate change is not going away, so people are not going to keep quiet about it. Governments of climate-threatened and climate-progressive countries will not stay silent. NGOs will continue to campaign. Activist shareholders will continue to pressure companies. Millennials and their successors will continue to care deeply about the state of the world they live in and they will increase in electoral influence as time goes on.
So my key message to clients and colleagues is: do not make the mistake of thinking that any one election result will bring global climate action to a sudden and permanent halt. It will not. It is too late for that. The world is still moving towards a zero net carbon future and we all need to be ready for that.