Is There a Plan B for Climate Change?

12/04/2011 12:50 EST | Updated 02/02/2012 05:12 EST
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History may vindicate the view that the 2009 Copenhagen climate talks were the most successful failure of modern times.

Plan A was a top-down deal involving global institutions, massive cross-border public resource transfers and national commitments to which sovereign states could be held to account. The problem with plan A was not that the deal could not be closed, or even that the table stakes of $100 billion a year could not be raised. The real problem is that plan A would absorb our attention and resources for years to come, while evoking the fury of the five institutional horses of the apocalypse: political leakage, gaming, rent-seeking, bureaucratisation and corruption. Plan A, in a nutshell, simply would not work.

By contrast, the alternative plan B is a messy, thoroughly human affair. National, regional and city initiatives developed with their citizens' narrow interests in mind, jobs, income and security. Such initiatives would be amplified and accelerated through international co-operation. Such co-operative arrangements might be evoked by richer folks' sense of public responsibility. But in the main, they would be driven by self-interest and fear, and perhaps some residual guilt.

Plan B may be the only option, but it's still a high-risk gamble, as the UN Environmental Chief, Achim Steiner scathingly argues:

The world has no option but to reach a binding agreement. If we don't have a global agreement, we become captive to the narrow self-interest of countries who only see the competitive advantage rationale in whether to act [on emissions] or not.

And he has a point, with the UN's latest Emissions Gap Report highlighting the gulf between emissions reduction commitments and what needs to be achieved, and McKinsey Global Institute's blistering analysis in "Resource Revolution" of the massive resource productivity gap we face by 2030 as our planet struggles to satisfy the consuming demands of 3 billion middle-class folks.

Two years on from Copenhagen, how is plan B playing out? Renewables is a case in point. China plans to develop a staggering 500GW of renewable energy generation by 2020, and with more than $1 trillion allocated in its 12th five-year plan to 2015 for renewables and smart grids. This mega-bet is catapulting China into becoming the world's leading provider of renewables infrastructure.

But most developing countries cannot afford the additional costs of renewables, which is where the plurilateral bit comes into play. Morocco is advancing plans to build at least 5GW of renewables by 2020, with its plans to sell its desert energy to Europe attracting both private and public investors such as the European Investment Bank. India's flagship programme, the India Solar Mission, intends to attract $50 billion in new investment. To kick-start the process, it is seeking support from international public institutions such as the International Finance Corporation.

South Africa is advancing a game-changing increase in renewables, with plans for 17.8GW by 2030. The South African Renewables Initiative, to be launched in Durban on Dec. 7, is a South African government platform designed to attract other countries and public institutions as partners in financing the scaling up of renewables, including the UK government. The extra costs of delivering current plans for renewables are estimated to be up to $9 billion. Were South Africa to raise its ambitions even further, to a technically feasible 24GW by 2025, the extra costs would rise to up to $14 billion. Not surprisingly, South Africa has made the point loud and clear that it needs help in paying this bill.

Such lighthouse initiatives show how in practice blending international public finance with private capital can reduce costs, and thereby raise ambition. For South Africa, low cost debt in sufficient volume, combined with insurance instruments that reduce commercial risks, could reduce the incremental costs of current plans by about one third. What remains is still a number to be reckoned with, but one that is much easier to digest domestically in return for the economic benefits that will flow along with additional tax receipts and foreign exchange earnings.

Plan B has to work, and the evidence is that it has legs. But there is a long way to go in addressing Steiner's challenge of delivering the big numbers. The International Energy Agency estimates that $5.7 trillion must be invested in renewables alone by 2035 to avoid catastrophic climate change.

Meeting this need requires a stepwise shift in mindset and practice. Current international public financing for renewables, principally debt not grant, is not of the right order of magnitude. Piecemeal international support and uncertain domestic plans create a vicious circle of low ambition and opportunity, weak leadership and distrustful investors who will as a result charge more for doing less.

Turning the vicious into a virtuous circle that delivers ambitious renewables development, accelerated climate mitigation and upside economic benefits will require the international community to make larger-scale, longer-term, more credible commitments, and likewise domestically.

Durban must move beyond demands for a drip-fed plan A. It must embrace an ambitious plan B rooted in communities' interests in having jobs, income and food on the table. With this in mind, new financing mechanisms must be close to the ground, and focus on mobilizing lighthouse initiatives with mutual interest driving international co-operation such as in the cases of Morocco, India and South Africa. Banking on such initiatives could inspire the climate talks to advance actions that have a sporting chance of building on Copenhagen's successful failure.

An earlier version of this post appeared in The Guardian.