Climate Change and You: Kicking the can at COP

Dear Reader,

Welcome to the second issue of Mint’s fortnightly newsletter, Climate Change and You. The first dispatch, written by my colleague Bibek Bhattacharya, was a backgrounder on the state of global climate, the consequences of global average temperatures overshooting the 1.5 degrees Celsius target and India’s progress on its Net Zero emissions target—landing on your mailbox just after the global climate summit had begun in Baku, Azerbaijan, on 11 November.

State of the Climate

The climate summit, COP29, it was hoped, would galvanize finance to help developing countries transition to clean energy, curb greenhouse gas emissions, and protect their citizens from the impacts of climate change. Developing countries including India spoke in unison, asking for $1.3 trillion in climate finance from rich countries. This may seem a large sum, but not when one considers the size of the global economy and financial markets, estimated at $110 trillion a year.

However, in the end, developed nations agreed to pay a much lower sum of $300 billion--that too, only by 2035. This new finance goal replaces an earlier one to provide $100 billion a year beginning 2020, which was met but only once in 2022.

The new $300 billion target will source money from a wide variety of sources, which include public funds, loans, and private finance. India termed the amount as “abysmally poor" and “paltry", and objected to the process of adopting the agreement in an “unfair" manner without giving it an opportunity to voice its concern. Nigeria, supporting India’s position, said the amount was a “joke" and an “insult". Not surprisingly, representatives from developed countries lauded the outcome. COP29 will be “remembered as the start of the new era of climate finance", Wopke Hoekstra, climate commissioner at the European Union, said.

“The global north has abandoned the south with this meagre offer … the ambiguities of the ($300 billion) goal make it clear that there will be little accountability and traceability of funds. This was the last remaining window for the North to step up, pay its fair share, and restore some semblance of trust in the multilateral process. (But) They have failed," Avantika Goswami, programme manager of climate change at Delhi-based think tank, Centre for Science and Environment, said in a strongly worded statement.

Developed countries have a responsibility due to their historic emissions—for instance, the United States alone contributed 20% to global CO2 emissions between 1850 and 2022. However, rich countries have argued that making large sums of government finance available to poorer nations may not go down well with their own electorate at a time when their economies have slowed down and inflation is still a concern. But then, climate catastrophes do not distinguish between the rich and poor. And we have seen several of those in recent years—be it the floods in Spain, wildfires and hurricanes in the US and the European Union.

The COP29 also reached an agreement on carbon markets under Article 6 of the Paris agreement, under the aegis of the United Nations. This will allow countries to buy and sell carbon credits, allowing finance to flow to countries that undertake emission reduction via solar, wind energy, and forestry projects. The new system offers some hope, for in the past, voluntary carbon markets have been mired in controversy, including in India.

The news in brief

-In his latest column on climate change, Bibek argues that if humanity wants to become a truly advanced, inter-planetary civilization, then it will have to ditch fossil fuels for renewable energy.

-This Bloomberg piece provides a detailed account of how negotiations at COP29 were revived from the brink of failure, including a walkout by vulnerable small island states. Some frustrated delegates even pointed fingers at the presidency of Azerbaijan, which lacked the negotiating experience of past hosts.

-In this opinion piece, Tulsi Jayakumar, professor of economics at SPJIMR, argues that the growth-inflation trade-off will become increasingly complex with rising climate risks. A close cooperation between the government and the central bank will be crucial for effective planning and adaptation.

-This story by Nehal Chaliawala shows that increasing use of renewable energy has shrunk the energy bills for cement and metal firms in India. Renewable energy has become more affordable than these companies’ captive thermal power, given the volatility in coal prices.

Climate Change Tracker

This story I read in The Washington Post left me gasping. It’s about a group of investors in the US trying to redirect real estate investments. Their thesis is simple: investors could earn more, and risk less, by investing in better buildings in safer cities. On the contrary, cities vulnerable to climate shocks may wither away after repeated blows. So, it may be wise to avoid hot real estate markets like Florida, Texas or California-- because of how vulnerable they are.

Then there’s the iconic David Burt who had successfully bet on the subprime housing market collapse of 2008 (and appeared in the book, The Big Short, authored by Micheal Lewis). Burt is now arguing that climate risk and subprime mortgages are somewhat similar: massive amounts of unpriced risk in the housing market that most people are ignoring. In his words, “there’s got to be a reckoning."

The story may leave you wondering at the sky-high prices of premium real estate in Indian cities and where they may be headed a decade or two from now. Where will Gurgaon, the dust bowl be, or Mumbai, which is vulnerable to sea level rise and floods, among other climate risks? Do we need to rethink real estate investments?

Know Your Jargon

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Just Transition: As countries adopt low carbon emission solutions, say from coal to renewable energy, there is an economic threat to communities and workers dependent on the fossil fuel industry. A just transition ensures that these workers do not suffer economic losses as countries move to cleaner technologies. The goal of a well-managed transition is to mitigate the impact of climate change without causing economic disruption in the lives of fossil fuel dependent communities. Globally, a just transition means that when one country acts on their climate goals, it does not end up pushing poorer nations behind, by creating barriers to trade or excluding them from accessing cleaner technologies.

According to a recent report from the think tank iForest, India would need to mobilize close to a trillion dollars over the next three decades to ensure a just transition away from coal mining and coal-based power plants.

Prime Number

57.1: Global greenhouse gas (GHG) emissions set a record of 57.1 gigatons of carbon dioxide equivalent (GtCO2e) in 2023, a 1.3% increase from 2022 levels. This was higher compared to the increase during 2010-2019, when emissions growth averaged 0.8% per year.

In 2023, electricity production contributed most to emissions with a 26% share. This was followed by transport (15%) and industry (11%). Agriculture and land use change contributed about 18%.

Among countries, China contributed the most to global emissions (30% share), followed by the US (11%) and India (8%). The 27 countries which constitute the European Union contributed 6% to GHG emissions.

To limit global average temperature increase to 1.5 degrees Celsius above pre-industrial levels, global emissions have to be cut by 42% by 2030. This may sound daunting, but as per the United Nations Environment Programme (UNEP), increased deployment of solar photovoltaic technologies and wind energy could deliver 27% of the total emission reduction potential in 2030 and 38% in 2035. Action on forests could deliver another 20%.

“Every fraction of a degree (of temperature increase) avoided counts in terms of lives saved, economies protected, damages avoided, biodiversity conserved," wrote Inger Anderson, executive director at UNEP, in the preface to the 2024 Emission Gap Report published ahead of COP29 in October.

Movie of the Month

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With the world dragging its feet on dealing with the climate crisis, this is a good time to watch the 2021 satire Don’t Look Up, starring Leonardo DiCaprio (whose character was inspired by the climate scientist Michael E. Mann). The film tells the story of two astronomers who warn of an approaching comet likely to lead to the extinction of human civilization. The world is divided between those who think the comet is a threat and others who deny its fatal impact, like climate change deniers. Meanwhile, a billionaire CEO takes politicians in confidence to mine the comet.

That’s all, for now. Bibek will fill you up next, in a fortnight.

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