No 706 Posted by fw, March 29, 2013
“There are signs the climate movement could be on the verge of a remarkable and surprising victory. If we read the current context correctly, and if the movement can adjust its strategy to capture the opportunity presented, it could usher in the fastest and most dramatic economic transformation in history. This would include the removal of the oil, coal and gas industries from the economy in just a few decades and their replacement with new industries and, for the most part, entirely new companies. It would be the greatest transfer of wealth and power between industries and countries the world has ever seen.” —Paul Gilding
In the following post, writer, environmentalist, consultant, Paul Gilding, lays out the evidence to support his thesis, stated below in his opening paragraph and repeated above. While you may not be totally persuaded by Gilding’s evidence, nevertheless, his argument is thought-provoking. Let’s hope he’s right.
To read his original piece, click on the following linked title. Alternatively, the repost below includes abundant subheadings to facilitate speedy browsing of main ideas, with text highlighting for added emphasis.
Important Note of Clarification: In an email to me, Gilding clarified that he is using the term “tipping points” in a political/economic sense and not in the more familiar ecological/climate change sense — I wrote asking for clarification because the meaning was not explicitly clear to me.
Sure signs the climate movement is on the brink of victory
There are signs the climate movement could be on the verge of a remarkable and surprising victory. If we read the current context correctly, and if the movement can adjust its strategy to capture the opportunity presented, it could usher in the fastest and most dramatic economic transformation in history. This would include the removal of the oil, coal and gas industries from the economy in just a few decades and their replacement with new industries and, for the most part, entirely new companies. It would be the greatest transfer of wealth and power between industries and countries the world has ever seen.
The climate change movement is massive, global, powerful, and on the right side of history
To understand this incredible potential we first have to step back and understand the unique structure of this social change movement, which may rank among the most influential in history. It is simplistic to characterize it as an alliance of grass roots organisations and activists pitched against a rich and well-connected adversary. While that is part of the story, it is more accurately understood as an idea whose tentacles reach into every tier of government, the world’s largest companies and financial institutions, and throughout the academic and science communities.
Because of this, it is winning the battle from within: Its core arguments and ideas are clearly right; being endorsed by the world’s top science bodies and any significant organization that has examined them.
Far from being at society’s margins it has the support, to various degrees, of virtually all governments, and many of the world’s most powerful political leaders, including the heads of state of the USA, China and other leading economies. It counts the CEO’s of many global companies and many of the world’s wealthiest people as active supporters – who between them direct hundreds of billions of dollars of capital every year towards practical climate action.
And of course, this comes on top of one of the most global, best funded, broadly based and bottom up community campaigns we have ever seen.
That is the reality of the climate movement – it is massive, global, powerful, and on the right side of history.
So how come global CO2 emissions continue to trend upwards?
So why, many ask, has it so far not succeeded in its objective of reducing CO2 emissions? Much has been written on this topic but most of it is wrong. It is simply an incredibly big job to turn on its head the global economy’s underpinning energy system. And so it has taken a while. Considering how long other great social movements took to have an impact – such as equality for women or the end of slavery and civil rights movements – then what’s surprising is not that the climate movement hasn’t yet succeeded. What’s surprising is how far it’s come and how deeply it has become embedded in such a short time.
We have an opportunity to eliminate net CO2 emissions and to secure a stable climate
And now is the moment when its greatest success might be about to be realized – and just in time.
We are at the most important moment in this movement’s history – in the midst of two simultaneous tipping points that create the opportunity, if we respond correctly, to win:
New climate science research has helped to reveal the emergence of two political/economic tipping points
I have come to this conclusion after reflecting on a year when an avalanche of new knowledge and indicators made both tipping points clear.
These dire warnings have finally captured the attention of influential conservative bodies
In response came a series of increasingly dire warnings from conservative bodies like the International Energy Agency, the World Bank and the International Monetary Fund. Perhaps most colourfully, the IMF chief and former conservative French finance minister, Christine Lagarde, said that without strong action “future generations will be roasted, toasted, fried and grilled”. The World Bank was similarly blunt about the economic consequences of our current path: “there is also no certainty that adaptation to a 4°C world is possible.”
Transformational economic change is now accepted as our only option
These and other reports laid out the evidence that the only option was transformational economic change because the alternative was simply unmanageable. Action was no longer a preferred outcome but an essential one. As the World Bank said “the projected 4°C warming simply must not be allowed to occur”. Even the IEA, historically a kind of advocate in chief for the fossil fuel industry, came on board, pointing out that a stable climate and economy requires the majority of the global reserves of fossil fuels to never be burnt.
It is an extraordinary turn around when key mainstream economic institutions lay out the case for dismantling what is arguably the world’s most powerful business sector.
An ecological question has now become an economic one, too big for society’s elites to ignore
Of particular note in all this, observing both the message and the messengers, is that what was predominantly an ecological question is now primarily an economic one. This is a profoundly important shift, as economic risk is something society’s elites take very seriously.
Two major political/economic tipping points are emerging: non-fossil fuel companies will demand climate change action and the transition to renewable energy is already under way
Rooftop solar for example has grown so fast it is now eroding the profitability of major utilities by taking away their high margin income – peak pricing – and reducing demand. This is already seeing major economic disruption to companies and national economic infrastructure as this report from UBS on developments in Europe shows, with major shutdowns of coal plants now inevitable.
Growing awareness that continuing exposure to fossil fuels poses considerable financial risk
Of equal importance, and partly triggered by these market shifts, is the awakening of the sleeping giant of carbon risk, with open discussion in mainstream financial circles of the increasing dangers in financial exposure to fossil fuels. This has been coming for several years because of the financial risk inherent in the carbon bubble. As Phil Preston and I argued in a paper in 2010 and I further elaborated in The Great Disruption, the contradiction between what the science says is essential and the growth assumptions made by the fossil fuel industry is so large it represents a systemic global financial risk. This has been well articulated and more deeply explored by groups like Carbon Tracker who have been taking the argument to the mainstream finance sector.
In 2012 this hit home, with significant economic and financial players like the IEA, HSBC and S&P talking about the concept of unburnable carbon and the financial risks in both investing in fossil fuels and in lending to coal, oil and gas projects. HSBC forecast a market value loss of 40 – 60% for oil and gas majors if the world acted to keep below 2 degrees. The IEA forecast the revenue loss in that scenario for the global coal industry would be $1 trillion every year by 2035.
Bottom line – We are on the cusp of a truly historic economic transformation
Combined, these two tipping points present the opportunity for the broad climate movement to achieve success, if they are understood and responded to appropriately by the activist, policy and business communities. But first they must be seen for what they are – indications we are poised on the edge of a truly historic economic transformation – the end of fossil fuels and the building of a huge new industry sector.
Sounding the alarm — We have just 20 years to remove the coal, oil and gas industries from the economy
Is that it? Can we now sit back and expect the market deal with this?
Most definitely not. It is probably true that the market would sort this out by itself if we had 60 years for it to do so. But we don’t. The science is clear that we have less than 20 years — and this is where the opportunity for the climate movement emerges and why the choice of focus and strategy is now is so important. The task at hand is clear for policy makers, for business and investors as well as for the activist community. It’s acceleration of existing momentum – to slow down fossil fuels and speed up clean energy. To make the 60 year process, a 20 year one.
It is now realistic to imagine removing the coal, oil and gas industries from the economy in less than 20 years. Doing so is required if we are to have an 80% or greater likelihood of preventing the climate warming past 2 degrees C, a point past where the system could spin out of control.
The bad news – Failure to make the transition will result in social and economic breakdown
What we are now hearing from major international economic institutions is that this is a binary choice. Either this happens or we head for social and economic breakdown. As the World Bank argues, the latter “must not be allowed to occur”.
The good news – the task is simple and achievable
Timing is the key shift the world needs to make in its thinking – this is no longer about the future, it’s about now. We don’t have 20 years to decide to act; we have 20 years to complete the task. If we follow the science, then in 20 years we must have removed the coal, oil and gas industries from the economy and replaced them. It’s simple, it’s urgent and perhaps most importantly, it’s now achievable. [My comment: Here, Gilding says “it’s simple” but be prepared for a contradiction to follow].
Recent history tells us we are capable of transformational economic change
History gives us many examples of dramatic economic shifts – like the arrival of the computer chip and with it, the internet, the emergence of communications technologies and other facilitators of globalization. We also have many examples of “whoops” moments – points when we realize after the event something was a very bad idea. Like tobacco, asbestos, lead in fuels and paint, ozone depleting CFCs and various other chemicals. Collectively, this tells us something very important. While each case is different, we are capable of transformational economic change and while it’s often disruptive and always fiercely resisted, we regularly do it. This is much larger in scale but the same processes apply.
We need to keep reminding ourselves that this kind of economic transition is OK. That’s how markets works and while it will be challenging and require huge effort, it will work out. Yes, huge amounts of wealth will be lost and gained in the process, industries, countries and cities will face massive economic and practical restructuring challenges and many people will suffer in the process. But that’s how market shifts happen.
Austrian economist Joseph Schumpeter coined the phrase “creative destruction” to describe this process and to explain why it’s the underpinning strength of capitalism, calling it: “A process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
We cannot underestimate the scale of the challenge
But while we can be comfortable that this process will deliver the required outcome, it’s not going to be smooth or pleasant for many participants. It will rather be messy, highly controversial and see huge amounts of value and employment both destroyed and created as the economy restructures around the necessary reality of a post fossil fuel economy. I’m neither relaxed about this nor naïve about the scale of the challenge. I just accept that it’s now inevitable. I also know we can do it and that we simply have no choice.
Of course, the losers will fight all the way to the end, using every argument, manoeuvre and delay they can think of. We should expect nothing else of them and, realistically, most of us would do likewise faced with similar circumstances. But they will still lose.
I do not however think we should demonize the fossil fuel industry or the people involved in it. The job to remove this industry has to be done – the future of civilization literally depends on it – but we can do this firmly and clearly without making it personal. As I’ve said in recent speeches on this topic – with some humour but a serious message – “we have to remove the coal, oil and gas industries from the economy with love and compassion.” This is the tough love of responsible parenting – the kids don’t like it but it’s still the right thing to do.
So with some surprise, this is where we find ourselves. It still won’t happen without focused and determined effort, — [My comment: Well, maybe it ain’t so simple after all] — but for the first time, we can envisage victory in the decades-long fight on climate change. The science is clear, the technology is ready, significant sections of the elite are on side and the financial momentum is with us.
And this time, the economics is playing on the same side as the environment. Just in time.
Paul Gilding is an independent writer, advisor and advocate for action on climate change and sustainability. An activist and social entrepreneur for 35 years, his personal mission and purpose is to lead, inspire and motivate action globally on the transition of society and the economy to sustainability. He pursues this purpose across all sectors, working around the world with individuals, businesses, NGOs, entrepreneurs, academia and government.