For the better part of the last 25 years the international community has been focusing, until relatively recently, on trying to get a comprehensive
international treaty to deal with the problem and try to force countries to
take action what we’ve seen in the last few years
what we’ve called the new economics of climate change is a reversal of this
assumption that all domestic action or even most domestic action is net costly for countries when you take into account that there are lots of opportunities to
reduce emissions that are negative costs that save money like energy efficiency
or reducing fossil fuel subsidies… when you take into account the extent to
which clean technologies have fallen in cost over time and there’s enormous
potential for costs to continue to fall with the right policies, and when you
take into account these so-called co-benefits or non-climate benefits of
action you can actually see that when you put all of these together, with the
right policies in place, countries can decarbonise their
economies in ways that the benefits outweigh the costs and this is, I think, a
really new and quite revolutionary set of understandings that have emerged
which completely reshape the policy domain for climate action. If
we keep in mind this idea that the national benefits of acting will
outweigh the national costs of acting over the medium term, that suggests that we don’t have an economic problem – there is not an economic challenge in acting on climate –
but that doesn’t mean that there aren’t political challenges or finance
challenges or technical challenges. Some of the barriers are, even though the
benefits outweigh the costs, how are those benefits and costs
distributed across time and across agents? Well we see that most of the
costs are distributed to very, very powerful agents in the fossil fuel
sector – companies in the fossil fuel sector and energy-intensive
manufacturing – and they’re biased towards the short term and politics and business
are very short-term focused, whereas the benefits tend to accrue, even the non
climate benefits tend to accrue in the medium term over a maybe 5-10 year time
horizon. So this the lower fuel costs from
renewable energy, this is the air pollution benefits, this is macro-productivity gains.
They accrue in the medium term to a large number of actors and so that makes the
political economy of action still very difficult because it is very focused on short-term powerful actors. There are also financial challenges because even though the costs of, say, comparing renewable energy systems to fossil fuel systems – over the long
term it will be cheaper to do renewable energy in a lot of countries. The
financing component of the costs is usually high, there’s a lot of up-front
investment required and if the cost of finance are high that means the costs of
the projects can be higher – so there are finance challenges. And there are also, I
think, challenges around technology transfer for developing countries,
there are often institutional barriers there, and there are other kinds of
technical and operational challenges as well. Well if you have this situation where it’s in
countries’ medium-term national interests economically to do
things that also reduce emissions than your rationale for international
cooperation changes. And so the role for international diplomacy in the era of
the new economics of climate change is much more targeted and nuanced and it
doesn’t necessarily need to involve all 193 countries. What I think we need to
see more of is small groups of countries and even bilateral cooperation targeted
on overcoming these very nuanced barriers that I talked about earlier, these political economy barriers focused on helping to reduce costs of
action over time even further, so for example numerous countries could get
together to agree to deployment targets for the next suite of renewable energy
technologies that are currently expensive like offshore wind and
concentrating solar power. We could agree to deploy a certain amount of
those, create markets for them, bring the costs down which would benefit those
countries and others – co-ordination on research
and development again to bring, you know, new technologies to market,
coordination on energy efficiency standards, minimum carbon pricing in emissions intensive trade-exposed industries – co-operation on fossil fuel exports to
supply side policies. These are kind of the more nuanced areas where
I think countries that are willing to take a leadership role need to get
together and coordinate and help knock down some of those remaining political,
technical and cost barriers and spread the benefits more widely. So I
think there are enormous opportunities for a more nuanced kind of economically
beneficial climate diplomacy in the era of the new economics of climate change