After all, public and private Japanese banks are still funding new coal-fired power stations in Vietnam, Indonesia and Bangladesh, exploiting a loophole in Tokyo’s previous promise to reduce financing to such projects — a fact that’s causing some consternation among European investment funds.
For all the publicity garnered by South Korean President Moon Jae-in’s Green New Deal and pledge last month of a 2050 net zero target, Korean engineering companies, too, are working with Japanese funders on Vietnam’s Vung Ang 2 coal plant.
Chinese President Xi Jinping also garnered plenty of positive headlines last month for promising to bring the world’s largest emitter to net zero status by 2060 — but China still has 250 gigawatts of coal plants under development, more than the total existing fleets in India or the U.S.
Doubts are warranted when so many nations are falling far short of their own climate pledges. At the same time, it can be pushed too far. The promises of political leaders have real-world effects that we’re already seeing. On the path to getting the binding and comprehensive emissions policies that the world needs, there will be plenty of partial, vague and unenforceable pledges. Each of them, though, sets a new baseline that will help create the conditions for further, more ambitious policies.
Take the broadly accepted target that the world must stabilize atmospheric carbon dioxide at or below 450 parts per million. Until relatively recently, this was generally considered the most radical reasonable option.
The Intergovernmental Panel on Climate Change’s 2001 synthesis of scientific research took 450ppm as the lower bound of a range of outcomes stretching up to 750ppm. The influential 2006 U.K. government review of the economics of climate change by Nicholas Stern advised aiming for 500ppm to 550ppm. That ambition was considered bold at the time but is now accepted as grossly inadequate. Similarly, limiting warming to 1.5 degrees Celsius was rarely treated as a serious option until the 2015 Paris Agreement set a target “well below 2 degrees Celsius” at the behest of small island states that risk destruction from higher levels of warming.
What target skeptics miss is the feedback relationship between the stated goals of political leaders and the behavior of investors, engineers and lower-level officials whose work will help decarbonize the economy.
As should be obvious from the $3.5 billion a year spent on lobbying in the U.S. alone, the decisions of political leaders shape the field of what’s possible for businesses. When a politician embraces a net-zero ambition — and especially when, as in the European Union, those words are enshrined into law — the risks associated with carbon-intensive projects go up, while those associated with low-carbon technologies go down. That’s particularly the case when, as we’re seeing, the path starts to be followed by leaders in multiple countries. Lower-carbon approaches then become more viable. That shift in the technological frontier in turn makes it easier for politicians to set still bolder targets, because the political and economic costs of doing so have declined.
We’re seeing this sort of virtuous circle playing out. As we’ve written, the best guide to the path of power sector emissions in the 2010s wasn’t the International Energy Agency’s politics-as-usual scenario, but the one where radical action was taken to limit atmospheric carbon to 450ppm.
Just over a month ago, I greeted PetroChina Co.’s announcement of a 2050 “near-zero” emissions target by fretting that China may be more addicted to coal than oil. That’s still a reasonable concern, but Xi’s 2060 net zero promise two weeks after that column drastically changes the landscape. Within weeks of that speech, influential Chinese academic research institutes have already released a range of roadmaps that would illustrate how to put those words into action, with coal falling from nearly 70% of primary energy at present to 10% or less in 2050.
Any targets laid out by politicians will find themselves up against institutional inertia, unintended consequences and political pushback. That doesn’t make them worthless. Political rhetoric changes reality, and even a cursory examination of recent history shows you how quickly that can happen. Not one question was asked on the subject of climate during the 2016 U.S. presidential debates. This year, it’s been one of the most-discussed topics.
Turning round an oil tanker takes time. That doesn’t mean it’s impossible.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.
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