Guess who wrote this report. I’ll quote a bunch of it:
The climate change crisis is far from over. The decade 2000-2010 is the hottest ever recorded and data reveals each decade over the last 50 years to be hotter than the previous one. The planet is enduring more and more heat waves and rain levels—high and low—that test the outer bounds of meteorological study.
The failure of the USA, Australia and Japan to implement relevant legislation after the Copenhagen Accord, as well as general global inaction, might lead people to shrug off the climate issue. Many are quick to doubt the science. Amid such ambiguity a discontinuity is building as expert and public opinion diverge.
This divergence is not sustainable!
Society continues to face a dilemma posed here: a failure to reduce emissions now will mean considerably greater cost in the future. But concerted global action is still too far off given the extreme urgency required.
CO2 price transparency needed
Some countries forge ahead with national and local measures but many are moving away from market-based solutions and are punishing traditional energy sources. Cap-and-trade systems risk being discredited. The EU-Emissions Trading System (EU-ETS) has failed to deliver an adequate CO2 price. Industry lobbying for free allowance allocations is driving demands for CO2 taxes to eliminate perceived industry windfalls. In some cases this has led to political stalemate.
The transparency of a CO2 price is central to delivering least-cost emission reductions, but it also contributes to growing political resistance to cap-and-trade
systems. Policy makers are looking to instruments – like mandates – where emissions value is opaque. This includes emission performance standards (EPSs) for electricity plants and other large fixed sources. Unfortunately, policies aimed at building renewable energy capacity are also displacing more natural gas than coal where the CO2 price is low or absent. This is counter-productive when it comes to reducing emissions. Sometimes the scale of renewables capacity also imposes very high system costs. At other times, policy support for specific renewables is maintained even after the technology reaches its efficient scale, as is the case in the US.
The recession has raised a significant issue for the EU-ETS: how to design cap-and-trade systems in the face of economic and technological uncertainty? Phase III of the ETS risks delivering a structurally low CO2 price due to the impact of the recession on EU emissions. A balanced resetting of the cap should be considered. It is more credible to introduce a CO2 price floor ahead of such shocks than engage in the ad hoc recalibration of the cap in response to them. This would signal to investors that unexpected shortfalls in emissions would be used in part to step up reductions and reduce uncertainty in investments associated with the CO2 price. This is an important issue for the design of Phase IV of the ETS.
Climate too low a priority
Structural climate policy problems aside, the global recession has moved climate concerns far down the hierarchy of government objectives. The financial crisis and Gulf of Mexico oil spill have also hurt trust in the private sector, spawning tighter regulation and leading to increased risk aversion. This hits funding and political support for new technologies, in particular Carbon Capture and Sequestration (CCS) where industry needs indemnification from some risk. Recent moves by the EU and the US regarding long-term liabilities show this support is far from secured. Government support for technology development may also be hit as they work to cut deficits.
In this environment of policy drift and increasing challenge to market-based solutions, it is important to remain strongly focused on least-cost solutions today and advances in new technologies for the future. Even if more pragmatic policy choices prevail, it is important that they are consistent with, and facilitate the eventual implementation of market-based solutions.
Interdependent ecosystems approach
Global policy around environmental sustainability focuses almost exclusively on climate change and CO2 emissions reduction. But since 2008, an approach which considers interdependent ecosystems has emerged and gradually gained influence.
This approach argues that targeting climate change and CO2 alone is insufficient. The planet is a system of inextricably inter-related environmental processes and each must be managed in balance with the others to sustain stability.
Research published by the Stockholm Resilience Centre in early 2009 consolidates this thinking and proposes a framework based on ‘biophysical environmental subsystems’. The Nine Planetary Boundaries collectively define a safe operating space for humanity where social and economic development does not create lasting and catastrophic environmental change.
According to the framework, planetary boundaries collectively determine ecological stability. So far, limits have been quantified for seven boundaries which, if surpassed, could result in more ecological volatility and potentially disastrous consequences. As Table 1 shows, three boundaries have already been exceeded. Based on current trends, the limits of others are fast approaching.
For the energy industry, CO2 management and reduction is the chief concern and the focus of much research and investment. But the interdependence of the other systems means that if one limit is reached, others come under intense pressure. The climate-change boundary relies on careful management of freshwater, land use, atmospheric aerosol concentration, nitrogen–phosphorus, ocean and stratospheric boundaries. Continuing to pursue an environmental policy centered on climate change will fail to preserve the planet’s environmental stability unless the other defined boundaries are addressed with equal vigour.