April 2020    
Further thoughts on dealing with climate uncertainty 

Dear [firstname,fallback=friend],

As we settle into the new normal of uncertainty, the recent COP26 postponement reaffirms international timelines are just one of a long list of things in flux. In the absence of an annual COP to drive international climate cooperation, I find myself considering the unique test the Paris Agreement 2020 is shaping up to be. First and foremost, of its promise to broaden and deepen climate cooperation.

Rather than relying on COPs to drive conversations on climate action, let’s start building societies and politics that put resilience, preventative action and human security at the centre. With a window to systemic and geopolitical change now wide open, let’s think about the bigger shifts we could bank at COP26, beyond the incremental changes that international peer pressure can achieve. In a year where recovery conversations will dominate political discourse, let’s create the broad coalition for climate action and resilience as a vital element of recovery, safety and prosperity.

One thing is certain as we start contemplating these new challenges: we need conversations across silos now more than ever. While COVID-19 requires us to retreat from each other, perhaps somewhat surprisingly, my last few weeks in E3G have been defined by dialogue rather than isolation. The blogs below give a glimpse of the types of systemic changes we’re starting to think through. We don’t have all the answers, but we’re looking forward to discussing the right sorts of questions with you.

First, Claire Healy introduces the Global Financial Crisis and Climate Change Playbook developed in partnership with E3G and the Stanley Center for Peace and Security just before the recent global pandemic began. Then in light of COVID-19, Chris Littlecott and Leo Roberts examine the potential impacts of postponing COP26 on the transition from dirty coal to clean energy. Finally, Taylor Dimsdale explores how economic recovery also presents an opportunity to address climate risk to ensure a more resilient and just future.

Thanks for reading,

Jennifer Tollmann
Policy Advisor

Bike-1778118 1280 Blog — 9 April 2020
Playbook for global financial crisis and climate change
by Claire Healy

Late last year I had the honour of chairing a multi-day roundtable sponsored by the Stanley Center for Peace and Security, ‘The Next Global Financial Crisis and Climate Change: A Policy Agenda to Align with the Paris Agreement'.

The aim of this meeting was to prepare the climate community to jump into action and use the next financial crisis, whenever it hit, for a shift in paradigm. By the end of the week, we had come up with a package of demands, policies and new rules that could be implemented in a future crisis -  referred to as “the Playbook".

Needless to say, we did not foresee the COVID-19 pandemic. The speed, scale and scope of this global shock and the economic and financial crisis in its wake is astounding.  It is exposing the fragility of…well, everything. We expected a crisis, but not this one.

Introducing the Playbook

Out of ashes, phoenixes can rise. In the 20th Century, after the last great depression and the destruction wrought by two world wars, people demanded a different approach to politics, economics, and society. They demanded a social safety net and national insurance and health systems were introduced. They wanted good jobs for fair pay. They insisted their leaders cooperate and move beyond the ‘beggar thy neighbour’ nativist approaches that led to war and depression, and the Bretton Woods architecture was borne. None of this was easy or straightforward. Now it is up to us to shape the 21st Century recovery.

In this spirit, I present here the Playbook. It is by no means a perfect or finished product, but I hope that at this historic moment it offers food for thought. As a framework it will need underpinning with more robust analysis. My colleagues and I are working on this with our partners, while also broadening our approach to find common cause with other actors lobbying for a better economic model.

  • Change the rules and norms for a fair, just, and 1.5°C-aligned global economy
  • A 1.5°C trajectory for greenhouse gas emissions reductions will be locked in – or not – in the aftermath of COVID-19. There will not be another opportunity to mobilise finance in the order of magnitude already seen over these past weeks. To stay aligned with Paris, economic recovery plans will need to be broad-based to tackle the multitude of vulnerabilities in the system from crippling levels of inequality to climate impacts and biodiversity loss.

    With COVID-19, the global economy has ground to a halt, at untold cost. Public health systems are not up to par, and trust in government is at an all-time low.  For decades shareholder returns have trumped investment in essential public services. But now, investments previously baulked at because of their scale (e.g. in green infrastructure) have been dwarfed by new economic response packages that ignore the previously dominant cost-benefit analysis that undervalues the cost of inaction. The balance between the public and private sector has shifted. If there is a window to rewrite the social contract between governments and people, what are the new norms in a world of multiple crises? 

    The Playbook calls for new metrics of progress and models of corporate governance. Economic growth measured by gross domestic product (GDP) is too flawed a measure for a complex, carbon-constrained world. It fails to account for negative externalities and is generally a poor indicator of the welfare of people. Coronavirus has revealed the need for new indicators, incentives and institutions to make markets work better and help drive political attention, public investment and international cooperation to deal with market failures.

  • Guide a financial stimulus to expand and build the green economy
  • To stimulate the economy once the health risks are under control, money should go towards building resilience, not more risk. The Playbook sets out ideas on how to design conscious monetary and fiscal efforts to accelerate the transition to a more resilient economy. Business-as-usual is not neutral, quite the contrary; the imperative now is to focus any stimulus on the “right” things, and actively unwind the “bad stuff”—like fossil fuels. This is a time to re-structure our economies, so they are fit for the future and serve society.

    There are many policies that can reduce inequality alongside emissions. For example, “helicopter money,” which refers to a transfer from central banks directly to citizens, funded from a one-time creation of money rather than from borrowing. These direct deposits could be earmarked for domestic green infrastructure spending, such as investments in home energy efficiency, renewable energy systems, or electric transportation creating new jobs, cutting emissions and saving households money.  There are many more ideas like this to make the recovery fair and green.

    The Playbook pays tribute to the Network for Greening the Financial System and the Coalition of Finance Ministers for Climate Action. We will see now if their rhetoric was real. Green Banks, Green Bonds and the Green New Deal will all need to be a big part of the post-COVID-19 stimulus story.

    Rightly, development finance is being directed to immediate health system needs. Meanwhile the IMF faces funding calls from half of its membership, an unprecedented situation. We will need serious international cooperation and innovation to first service these needs but then also deal with the massive debt overhang once the dust settles. We can’t solve this crisis by ignoring the next one.

  • Use this moment to implement a structural end to the use of fossil fuels
  • At the roundtable we discussed using a crisis moment for the early retirement of coal plants, not imagining we’d be talking about an oil and gas sector on the brink six months later. Before the COVID-19 crisis, bolstered by walls of debt and decades of government support, many oil and gas companies were hovering on just the right side of junk-bond status. The crisis response should take the opportunity to reshape these industries rather than return to business as usual.

    With the price of oil at a 30-year low, this is a good time to phase out fossil fuel subsidies. The previous oil price plunge at the end of 2014 enabled over 40 governments to undertake reforms of their consumption subsidies.

    Thinking outside the box

    Last October, we tried hard to think beyond conventional wisdom on responses to economic crises. What we thought of as radical then, became almost mainstream overnight: direct payments to households, dividend bans, effective nationalisation of parts of the economy – by conservative governments no less.  Space is opening for new ideas, so it’s imperative for us to have a few ambitious ones ready in the top drawer so we can recover better, faster and together. I don’t often quote Lenin, but he once said, “There are decades where nothing happens, and there are weeks where decades happen.” We are living those weeks right now.

    Read the entire, Global Financial Crisis and Climate Change: A Playbook for Action, here.

    Coal-fired-power-plant-3767882 1920 Blog — 9 April 2020
    Coal, Covid-19 and COP26: Recovering better
    by Chris Littlecott, Leo Roberts

    Amid the global coronavirus crisis, COP26 will (rightly) not be held in Glasgow in November 2020. But what does its postponement mean for global efforts to accelerate the transition from dirty coal to clean energy?

    We see reasons for hope amid the current concerns, as real world trends continue to move away from coal. But policy makers will soon need to make decisions. Will they choose a transformational shift to a cleaner, healthier energy system? Or will they allow coal industry interests to capture the crisis to prolong their predatory delay, offloading health impacts and economic costs onto citizens?

    Almost one year ago, in late April 2019, UN Secretary General Guterres put the need for a transition from coal to clean energy firmly on the international diplomatic agenda. He underlined the need for ‘no new coal by 2020’ and for existing coal use to be curtailed. We explored these twin challenges for diplomacy in our article Overcoming inertia: Guterres has kickstarted the great global coal transition. The UN Climate Action Summit in September saw an initial response from governments, with lignite-heavy Greece showing what is possible with its commitment to phase out coal use by 2028.

    UK leadership on coal phase out

    The UK’s Presidency of COP26 meant that 2020 was seen as a year where further progress could be made on coal. The timeline has now been necessarily extended, but the underlying logic is still sound.

    The UK itself has been a global leader on coal over the past decade, with its experience showing that it is possible to rapidly move away from coal power generation. The UK government declared ‘no new coal without CCS’ back in 2009, while in 2015 it was the first national government to commit to a phase out of coal power generation. Coal use declined from 40% of electricity production in the GB grid in 2012 to 2% in 2019, with two further power plants closing for the last time in March 2020. The decline in coal use has been the single biggest factor supporting the UK’s decline in CO2 emissions while the economy grew.

    Looking internationally, the UK and Canada launched the Powering Past Coal Alliance in 2017, which has now grown to almost 100 members spanning national and sub-national governments and the private sector. This experience of international cooperation and domestic progress informed the UK’s emphasis on Energy Transition as one of the key strands for COP26. The UK's priorities recognise the centrality of shifting from coal to clean energy as a means of delivering on the intention of the Paris Agreement. Recent analysis from Carbon Brief shows just how steep the decline in coal use needs to be – around an 80% reduction in consumption by 2030 in order for the world to be on track to meet 1.5˚C pathways that don’t rely on negative emissions. This reinforces the importance of the challenges set by Secretary General Guterres – the world must stop building new coal plants and phase out existing coal power generation. All fossil fuels must be phased out, with coal moving first and fastest.

    Global trends are positive

    As we entered 2020, global trends were clearly pointing in the right direction:

    • Latest data on the global coal plant pipeline from Global Energy Monitor found that the scale of coal plant construction continues to shrink for the second year in a row. There are now <200GW under construction (half in China) and <300GW at earlier stages of development (one third in China).
    • GEM’s analysis also identifies that only 11 countries initiated construction of a new coal power plant in 2019. But there is further good news: E3G’s own review of the same data finds that there are now 57 countries that have zero projects in the development pipeline having cancelled or abandoned all projects proposed over the past decade.
    • Similarly, electricity production from coal power generation also declined by 3% in 2019 (the biggest in at least 30 years), according to analysis by Ember (formerly Sandbag).
    • This reduction in electricity generation reflects the continuing retirement of coal power plants in OECD countries. The Trump Administration has failed to ‘bring back coal’, with 107 GW of closures over the past decade and zero new power plants under development. But the EU is also keeping pace, with 74 GW already closed since 2010, 93 GW scheduled to retire under national coal phase out commitments, and just 50GW remaining.
    • Meanwhile analysis from Carbon Tracker finds that renewables are now cheaper than coal, highlighting that continued construction of coal power plants would risk wasting half a trillion dollars of unproductive investment. It is now better economics to plan to retire and replace existing coal power plants with new renewables.

    The immediate impact of the Coronavirus crisis on coal power generation has been to decrease demand for electricity generation and reduce emissions (of both CO2 and air pollutants, with major improvements in air quality as a result). Carbon Tracker estimate that coal generation in 2020 will decline by 6.8 - 20.3% on previous years.

    The crisis is also impacting on plans for coal plant construction (and indeed supply chains for renewables). GEM is tracking the impact of COVID-19 on coal power plant projects, finding that in many countries projects are delayed. Governments now have an opportunity to pause and reconsider which investments make most sense for their economic recoveries.

    As a starting point, governments should initiate a moratorium on new coal plant construction and permitting while they prioritise responses to the COVID-19 crisis.

    Risk of a rebound?

    However in China there is already a risk that Provincial Authorities and equipment suppliers will push forward further construction of new power plants, despite existing overcapacity making new coal plants uneconomic. China is home to half of global coal plant capacity and is considering targets for coal generation for its next Five Year Plan. The decisions it takes on coal will have global reverberations. Yet China’s own experience is that its economic stimulus of 2008-09 resulted in the air pollution crisis of 2012-13. There can be no excuse this time for continuing to construct new coal power plants that are economically destructive and would self-sabotage China’s efforts to position itself as a proactive international leader on climate, clean energy, and the response to COVID-19.

    The early signs of a response by the coal industry show that they will be willing to fight dirty in their efforts to grab hold of economic support measures and stimulus packages. US mining companies are shamelessly calling for reductions in the payments they must make to support former miners suffering from black lung. These coal companies are on the verge of economic collapse. They need an exit route that stops them from continuing to pollute policy making as well as air and water.

    Looking ahead to 2021

    The postponement of COP26 was necessary and sensible given the global health crisis. A move to 2021 strengthens the alignment of diplomatic efforts with the UK’s presidency of the G7 and Italy’s Presidency of the G20.

    In the short term, the space for international diplomacy on climate and coal has been disrupted. But the foundations are still in place for a definitive shift to a clean economy as policy makers respond to the new imperative of ‘Recovering Better’. Governments can accelerate the transition through restricting the remaining sources of coal finance (most notably from China, Japan and South Korea) and stepping up the provision of financial and technical support for renewables instead of coal. The new frontier for action on coal will now be the effort to ‘retire and replace’ existing coal plants as part of stimulus packages, recognising that doing so will support citizens’ health, national resilience, and economic recovery, as well as climate goals.

    ‘The best-laid plans of mice and men often go awry’ runs the famous phrase derived from Scottish poet Rabbie Burns’ ode ‘To a Mouse’ back in 1785. The world will not gather in Glasgow this November, but it will be there sometime soon. Scotland was central to the industrial revolution, with coal powering its shipyards and steel mills as well as dominating its electricity generation. But the last coal power plant closed in Scotland in 2016 and the country is a leader in renewable energy. Scotland and the UK are already looking to a future Beyond Coal – a rescheduled COP26 will be able to help others do so too.

    Sandbag-wall-246456 1280 Blog — 9 April 2020
    Managing climate risk in the time of COVID-19
    by Taylor Dimsdale

    We can’t prepare for every scenario or crisis that might befall us in the future. So, whether as individuals or institutions, we constantly consider the range of risks we face and make decisions based on imperfect information.

    Health experts have issued warnings about pandemics for decades – as have high profile public figures like Bill Gates in recent years. We knew this was coming.

    Governments were unprepared for COVID-19 because in any given year the likelihood of a pandemic is small, and easy to ignore. We are now seeing the impact of unlikely events, both in human suffering and economic terms, can be enormous.

    Crisis response to the pandemic is rightly monopolising the attention of most governments and businesses and will do so for months to come. Unfortunately, the need to respond and recover from this pandemic does not absolve us from the need to manage other risks, whether cyber, nuclear, or climate.

    As COVID-19 heads into the summer, it may interact with the active hurricane season in the Atlantic that experts are predicting for 2020. This is due to unusually warm water temperatures, including a 70% chance of at least one major hurricane making landfall in the United States. This raises the chance of something akin to Hurricane Harvey or Typhoon Haiyan making landfall just as cases of the virus are peaking and health sector and disaster response capacity is already stretched beyond its limits.  

    The coming weeks and months will be characterised by deep uncertainty. But there are two things that we can say for sure: first, a tremendous amount of money is going to be spent on responding to and recovering from COVID-19. Second, not a single country, institution or corporation is currently managing climate risk well enough.

    Governments must not let the urgency for recovery from the pandemic let even more risk build into the system.  There’s a meme circulating on social media that climate change needs coronavirus’ publicist. As we are already seeing with the pandemic, there will be second and third order impacts from climate change that will be difficult to predict but easy to imagine. Disaster response to weather events will stretch fiscal policies, threaten public services and possibly lower sovereign credit ratings. Growing food and water insecurity are likely to lead to social unrest in some parts of the world. Instability in the financial system from both climate policy implementation and physical impacts will affect pensions and dividends. Disruption of supply chains or entire industries will lead to job losses and political upheaval.

    There is a chance to use this moment to think more deeply and consciously about resilience – with respect to global governance, infrastructure investment, and the social contract between governments and their citizens. Resilience as a concept was attracting more attention even before COVID-19 and has only grown in importance over the past several weeks. As difficult as it may be, there are three things that decision makers should be thinking about when making choices about how to rebuild.

    First, recovery packages and investments should be stress tested against a full range of potential climate (and other resilience) scenarios. Governments can choose not to invest in preparing for the worst – but that choice should be well informed, not based on ignorance of the full range of possible outcomes.

    Second, the international community, including the UN as well as bodies like the G20, should prioritise institutional reforms needed for 21st century challenges. The World Health Organization’s role in the unfolding situation highlights the necessity of trust-based international institutions and cooperation. Our institutions – be they national or international, financial, development or economic – were not designed to deal with climate risk. But deal with it they must. Let’s make them fit for purpose. Institutional reform is the guardrail between a rules-based multilateral system and a world of purely power-based geopolitics.

    Third, investments made as part of recovery efforts should be based on building economic and social resilience, not just on efficiency or growth. This won’t happen organically – it is a choice that governments will need to make. And growth alone won’t result in an ability to manage critical risks, as we have seen first-hand over the past few months.

    Our response to this pandemic can result in stronger social safety and more resilient economies. In solving this crisis, we must not make the next one worse. 

    Shelter-in-place orders may limit the spread of this pandemic. There is no such measure with climate change, but we already have the tools we need to make low carbon, resilient economies a reality. We just need the institutional reforms that will allow us to use them.

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