Re-Tooling Economy for Low-Carbon Future is Critical Post-Paris Step
The ongoing international climate negotiations here in Paris are an intricate ecosystem of policy wonks, finance ministers and world leaders trying to create one seamless tapestry called a low-carbon future.
ICYMI: 100+ global companies call for bold #climate agreement in Paris. https://t.co/Az7WOS4RdN #COP21 https://t.co/IodVOBsUwm— Ceres (@Ceres)1449522842.0
But there’s another equally important ecosystem in play in Paris—the capital market ecosystem which must stitch its own tapestry for managing escalating global financial climate risks. More than I ever expected, this topic has been getting enormous attention—not just at Ceres-hosted events—but beyond. From stranded carbon assets and 2-degree stress testing to nominating climate-competent board directors and eliminating fossil fuel subsides, businesses and investors are all talking in lock-step about a top-to-bottom transformation in how our economic system factors climate risks and opportunities into daily decision-making.
I’ll be the first to admit, this transformation will not come easily or quickly. After all, we’re looking to shift an economy that has been driven by fossil fuels for more than a century. But a strong binding climate agreement—one that sends a clear market signal that the world is ready for a low-carbon future—will certainly hasten the process.
So what will it take to re-tool our economy for a de-carbonized world, a world that must reduce greenhouse gas pollution by 80 percent by 2050 to prevent catastrophic global temperature increases?
One key theme I heard often—New York Times columnist Thomas Friedman called it “the word of the day at COP21”—is stranded carbon risks.
Remarkably this concept didn’t exist a few years ago. But as economists and researchers began connecting the dots on the necessity of keeping fossil fuel resources such as oil and coal in the ground—rather than extracting and burning them—the potential of carbon assets being "stranded” began taking hold. The issue is especially germane for energy companies whose business models have long been premised on producing more and more fossil fuels well into the future, even while demand scenarios shift.
But with scientists and investors asking hard questions about how much carbon pollution the planet can handle, stranded assets has taken center stage. Last week, Carbon Tracker projected potential losses of up to $2.2 trillion for oil and gas firms who are overestimating future oil demand.
“It’s like the old Road Runner TV show where the coyote keeps jumping off the cliff—but his legs keep running and running,” Carbon Tracker’s CEO Anthony Hobley said, of the oil sectors’ overly bullish demand projections.
Another trend gaining traction in Paris is 2-degree stress testing. These tests would examine how companies’ long-term business strategies—especially energy companies—will hold up if negotiators are successful this week in achieving an accord that will limit global temperature rise to 2 degrees Celsius. Even if they don’t, political and business momentum for a low-carbon transition is unprecedented—and will only grow stronger.
Many European energy companies are doing these tests and it’s a big reason why some, including Total, are already shifting more capital towards cleaner natural gas and renewables and away from carbon-intensive coal.
But momentum is building to broaden this effort. “We should get all companies to do this,” said Sharan Burrow, general secretary of the International Trade Union Confederation.
Major public pension funds and other investors are also being pressed to do portfolio-wide stress tests.
Dozens of other ideas were highlighted for building a truly low-carbon economy—among the biggest, ending fossil fuel subsidies. Morocco, which has set a goal to get half of its power from green energy by 2030, has already taken this bold step. “It required political courage, but it sent a strong message,” Morocco’s energy minister said on Saturday.
U.S. pension funds are also advocating for changing the composition of corporate boards, especially at energy companies. Dozens of shareholder resolutions were filed with energy companies last year requesting that they diversify their boards.
“We need climate competent boards,” said Jack Ehnes, CEO of the California Teachers’ Retirement System, which manages nearly $200 billion in assets.
Ehnes also highlighted the important work of the Sustainability Accountability Standards Board, a nonprofit group pushing to strengthen and standardize corporate reporting on climate risks and other sustainability challenges.
As I return home from Paris, regardless of the final outcome, one thing is clear: the time has come to re-tool our global economy for a low-carbon future. Many businesses and investors are ready, but we’ll need to accelerate and broaden the effort—and do so quickly.
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One of nature's epic events is underway: Monarch butterflies' fall migration. Departing from all across the United States and Canada, the butterflies travel up to 2,500 miles to cluster at the same locations in Mexico or along the Pacific Coast where their great-grandparents spent the previous winter.
Millions of People Care About Monarchs<p>I will never forget the sights and sounds the first time I visited monarchs' overwintering sites in Mexico. Our guide pointed in the distance to what looked like hanging branches covered with dead leaves. But then I saw the leaves flash orange every so often, revealing what were actually thousands of tightly packed butterflies. The monarchs made their most striking sounds in the Sun, when they burst from the trees in massive fluttering plumes or landed on the ground in the tussle of mating.</p><p>Decades of educational outreach by teachers, researchers and hobbyists has cultivated a generation of monarch admirers who want to help preserve this phenomenon. This global network has helped restore not only monarchs' summer breeding habitat by planting milkweed, but also general pollinator habitat by planting nectaring flowers across North America.</p><p>Scientists have calculated that restoring the monarch population to a stable level of about 120 million butterflies will require <a href="https://doi.org/10.1111/icad.12198" target="_blank">planting 1.6 billion new milkweed stems</a>. And they need them fast. This is too large a target to achieve through grassroots efforts alone. A <a href="https://www.fws.gov/savethemonarch/CCAA.html" target="_blank" rel="noopener noreferrer">new plan</a>, announced in the spring of 2020, is designed to help fill the gap.</p>
Pros and Cons of Regulation<p>The top-down strategy for saving monarchs gained energy in 2014, when the U.S. Fish and Wildlife Service <a href="https://www.fws.gov/southeast/pdf/petition/monarch.pdf" target="_blank">proposed</a> listing them as threatened under the Endangered Species Act. A decision is expected in December 2020.</p><p>Listing a species as endangered or threatened <a href="https://www.fws.gov/endangered/esa-library/pdf/listing.pdf" target="_blank">triggers restrictions</a> on "taking" (hunting, collecting or killing), transporting or selling it, and on activities that negatively affect its habitat. Listing monarchs would impose restrictions on landowners in areas where monarchs are found, over vast swaths of land in the U.S.</p><p>In my opinion, this is not a reason to avoid a listing. However, a "threatened" listing might inadvertently threaten one of the best conservation tools that we have: public education.</p><p>It would severely restrict common practices, such as rearing monarchs in classrooms and back yards, as well as scientific research. Anyone who wants to take monarchs and milkweed for these purposes would have to apply for special permits. But these efforts have had a multigenerational educational impact, and they should be protected. Few public campaigns have been more successful at raising awareness of conservation issues.</p>
<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="91165203d4ec0efc30e4632a00fdf57d"><iframe lazy-loadable="true" src="https://www.youtube.com/embed/KilPRvjbMrA?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span>
The Rescue Attempt<p>To preempt the need for this kind of regulation, the U.S. Fish and Wildlife Service approved a <a href="https://www.fws.gov/savethemonarch/pdfs/Monarch%20CCAA-CCA%20Public%20Comment%20Documents/Monarch-Nationwide_CCAA-CCA_Draft.pdf" target="_blank">Nationwide Candidate Conservation Agreement for Monarch Butterflies</a>. Under this plan, "rights-of-way" landowners – energy and transportation companies and private owners – commit to restoring and creating millions of acres of pollinator habitat that have been decimated by land development and herbicide use in the past half-century.</p><p>The agreement was spearheaded by the <a href="http://rightofway.erc.uic.edu/" target="_blank">Rights-of-Way Habitat Working Group</a>, a collaboration between the University of Illinois Chicago's <a href="https://erc.uic.edu/" target="_blank" rel="noopener noreferrer">Energy Resources Center</a>, the Fish and Wildlife Service and over 40 organizations from the energy and transportation sectors. These sectors control "rights-of-way" corridors such as lands near power lines, oil pipelines, railroad tracks and interstates, all valuable to monarch habitat restoration.</p><p>Under the plan, partners voluntarily agree to commit a percentage of their land to host protected monarch habitat. In exchange, general operations on their land that might directly harm monarchs or destroy milkweed will not be subject to the enhanced regulation of the Endangered Species Act – protection that would last for 25 years if monarchs are listed as threatened. The agreement is expected to create up to 2.3 million acres of new protected habitat, which ideally would avoid the need for a "threatened" listing.</p>
A Model for Collaboration<p>This agreement could be one of the few specific interventions that is big enough to allow researchers to quantify its impact on the size of the monarch population. Even if the agreement produces only 20% of its 2.3 million acre goal, this would still yield nearly half a million acres of new protected habitat. This would provide a powerful test of the role of declining breeding and nectaring habitat compared to other challenges to monarchs, such as climate change or pollution.</p><p>Scientists hope that data from this agreement will be made publicly available, like projects in the <a href="https://www.fws.gov/savethemonarch/MCD.html" target="_blank">Monarch Conservation Database</a>, which has tracked smaller on-the-ground conservation efforts since 2014. With this information we can continue to develop powerful new models with better accuracy for determining how different habitat factors, such as the number of milkweed stems or nectaring flowers on a landscape scale, affect the monarch population.</p><p>North America's monarch butterfly migration is one of the most awe-inspiring feats in the natural world. If this rescue plan succeeds, it could become a model for bridging different interests to achieve a common conservation goal.</p>
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