• Growing awareness in the GCC toward climate change

Anthony Rowley

Special to Arab News Japan

TOKYO: Among the first acts of President Joe Biden was to take the US back into the Paris Agreement, a legally binding international treaty on controlling climate change, which Biden’s predecessor Donald Trump pulled out of, and to appoint former Secretary of State John Kerry as US “climate tsar.”

Both moves were good news for Planet Earth which faces growing threats from fires, floods, hurricanes, droughts and disease (to name but a few) as a result of global warming. The fact that powers like the US, China, Japan and the European Union have set carbon emission targets is also good news.

But the task of saving the Earth from existential threats facing the planet and its 7.8 billion human inhabitants and solving other mega socio-economic problems such as poverty, inequality and threatened social unrest (or even war) over competition for resources is still far from being a “done deal.”

Despite the shift on the part of the Biden administration to far more enlightened attitudes and actions than those of the Trump era, and despite emission targets being adopted widely, the question of who is going to implement needed changes and who will pay for them remains unanswered.

There is no “master plan” for fighting climate change, beyond the Paris Agreement signed in 2016 under auspices of the United Nations in which 196 nations agreed to targets for limiting their individual greenhouse gas (CO2) emissions to limit the global temperature rise to a tolerable amount.

Likewise, there is no grand plan for dealing with huge challenges linked directly or indirectly to climate change, such as the accelerating pace and scale of natural disasters, the need to adapt vital infrastructure such as transport and energy systems to cope with climate change and many more.

Countries of the Gulf Cooperation Council are among those to have realized the threats involved. The region’s climate “is changing rapidly because of human activities from year to year and from decade to decade,” Science Direct a specialist journal of the Elsevier publishing group reported.

“The Arabian Gulf region is interested in climate change on several levels, and there is growing awareness in the (region),” Science Direct noted. “The potential for climate change is affecting many sectors and systems, such as food security, renewable energies and public health.

“The wealth and luxury enjoyed by the people of the Gulf States will be affected by climate change, This impact is becoming apparent in many forms, including an increase in ambient temperatures in the region with severe decreases in precipitation (rainfall),” the journal added.

It is one thing, however, to acknowledge the seriousness of an existential threat like climate change and another to find ways of solving the problem. A widespread assumption is that governments will take care of it and another is that the private sector can do so. Both are over-simplifications.

Specifically, it is assumed that the United Nations Sustainable Development Goals (SDGs) approved in 2016 have identified the nature of the challenge and how to solve it, and that so-called “ESG” (Environment, Social and Governance) investment (also a UN idea) provides ways to finance the SDGs.

Calls to “Save the Planet” are coming from beyond the ranks of individual climate activists who were once regarded as cranks but who have since won more than grudging respect for their views. Climate consciousness has grown along with a surge in climate change-related natural disasters.

The gloom of ignorance and indifference that long obscured the threat of climate change is at last being penetrated by signs of enlightenment but the full dimensions of climate-linked socio-economic threats posed to the future of the planet and its inhabitants are not yet fully appreciated.

Reducing carbon emissions to a level that will prevent a catastrophic rise in temperatures means switching from fossil fuel usage in generating power to use of renewable energy.

But who will pay for shuttering myriad coal mines and fossil fuel power plants or writing off these “stranded assets?

Who will finance new power plants and who will pay for replacing foundries and steel mills essential to manufacturing? Who will pay to have billions of motor vehicles switch from gas to electric power? Where will the money come from to finance investment in myriad environment-friendly projects?

Mitigating the impact of climate change on advanced and developing economies will cost trillions of dollars, to say nothing of the spread of infectious diseases (such as Covid-19) that will require huge amounts of money to deal with by way of improved health facilities and sanitation.

The cost of transitioning to a sustainable, low-carbon economy in line with the UN Sustainable Development Goals has been estimated by one senior Bank of England official as being up to $90 trillion by way of new investments in the decade from 2020 to 2030 – equal one year’s global GDP.

Costs involved in writing off stranded assets alone could be up to $4 trillion. Supplying infrastructure (transport, energy and communications) essential to human activity is another area where huge spending will be needed. Official estimates put this at up to $100 trillion by the mid-2030s.

Who exactly is supposed to finance such vast expenditures is a good question and it is one that is not asked often enough. The UN made a stab at answering it when it published the Sustainable Development Goals five years ago but there has been no convincing follow-through since then.

UN members agreed in 2016 on broad areas into which investment needed to flow if economic welfare and social stability were to be maintained and if environmental degradation halted. These were enshrined in 17 goals with the broad aim of ending poverty, ensuring prosperity and protecting the planet.

They represented in the words of the UN Development Programme a “universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. They included among others dealing with climate change and the need for “sustainable consumption.”

The UN estimated that implementing these ambitious but essential goals at $5 trillion or $5,000 billion annually over the 15 years from 2015 to 2030 – or some $75 trillion in total and equal in value to nearly one year’s global gross domestic product.

Such amounts are difficult to grasp because of their sheer size and they are sometimes confusing because estimates vary enough to justify calling them “ballpark guesses.” Nevertheless, they are big enough to illustrate what a colossal financial challenge is posed for the future.

The UN suggested that governments around the world be unable on average to pay more than half the cost of financing the SDGs and that the private sector would need to find the rest – meaning some $2.5 trillion a year on average or approaching $25 trillion in the period from now to 2030.

This may appear do-able given estimates by the World Bank Group that the amount available in the world’s private savings is around $270 trillion or around three and a half times annual global GDP. But most of this is already invested and cannot easily be shifted into saving the planet.

The ESG investment movement can help to some degree in helping finance UN climate change and other development goals because it places on companies and financial asset owners an obligation to accept environmental and social (as well as governance) goals in their investment policies.

But this is very different from creating purpose-built agencies with the authority and ability to implement climate change and other socio-economic goals. Even so, ESG has already attracted some $20 trillion of funds  from institutional and individual investors who deserve a better global plan for saving the planet.