The realist case for combating climate change
2019/08/15

Sumiko Takeuchi
Senior fellow and member of the board of directors at the IEEI※

Reprinted by courtesy of The Japan Times（JUN 13, 2019）Japan was hit by a spell of unseasonably hot weather in late May. Weather is normally
mild in May and that is why many schools hold annual sports events then. However,
due to an unusual heat wave this year, hundreds of people across the country suffered
heat strokes and there were several fatalities. In northern India, temperatures
reached 50 Celsius in early June, causing fears of a severe drought. While it may not
be scientific to attribute extreme weather entirely to climate change, it is undoubtedly
a pressing challenge that must be addressed.
Countries around the world joined the efforts to combat climate change in the 2015
Paris Agreement. This is a remarkable first step, but it does not mean that the problem
has been sufficiently addressed. Each country is free to decide how vigorously it willfight global warming. Even if all countries meet their current targets, we will still fall far
short of the agreement’s goal to keep the rise in global temperature within 2 degrees
from pre-industrial levels.
Why do countries fail to set more ambitious targets? Is it due to the economic interestsof greedy adults — as suggested by young protesters calling for more aggressive
actions? If “green growth” is brought about by aggressive actions through ambitious
targets, there will no doubt emerge new forces that count on new interests to begenerated by such growth, and governments will be more willing to set higher targets.
If that was the case, the international climate negotiations would not have been soconfrontational. However, such rosy picture is not in line with reality.
The reason why governments have difficulty setting far-reaching targets is that there
is a strong correlation between economic growth and energy consumption. Mitigation
efforts, especially carbon pricing, would inevitably entail costs to their nationaleconomies and governments need to address trade-offs between mitigation efforts
and other policy objectives. Since Japan’s energy prices are among the highest in theCopyright © 2019 International Environment and Economy Institute. All rights reserved.

OECD, raising them further by more ambitious actions could damage its industrial
competitiveness and cause regressive effects on low-income families.
The only solution to resolving the trade-offs will be innovations for disseminating
low-carbon technologies with higher performances and lower costs. Today, coal-fired
thermal power generation is often demonized due to its high carbon content. However,even in Germany — hailed as the frontrunner in the fight against climate change —coal accounts for roughly 40 percent of total power generation.
This is partly due to challenges faced by renewable energy in terms of its costs andnegative impact on electricity grid stability. It is true that the cost of renewable
technologies has been rapidly declining in recent years. However, as the share ofvariable renewables such as solar and wind grows, more investments for powertransmission lines are needed and thermal power plants remain necessary forcounterbalancing the unstable power output of variable renewables.
Ruling out the construction of new coal- fired power plants based solely on climate
concerns without overcoming the challenges posed by variable renewables could
result in prolonged dependence on old, inefficient coal-fired power plants to ensure
grid stability, which would result in more emissions due to the failure to replace theseold plants with new, more efficient ones. A one-sided view is often the enemy of aneffective solution. More importantly, coal is still cheap and abundant throughout theworld, and developing countries need an affordable and reliable energy supply to fueleconomic growth.
As discussed above, innovation is the key to fighting climate change. This requires asustained financial flow for innovative low-carbon technologies. Will rapidly expanding
ESG investing — investment methods that consider environmental, social andgovernance factors — make that possible? ESG investing is growing but it is still in its
infancy.
For example, the European Union is currently legislating “sustainable finance” forinducing a financial flow to a list of technologies that meet sustainability criteria. But it
is a rather complicated exercise to judge which technologies will effectively reducecarbon dioxide emissions.
For example, electric vehicles are deemed emissions-free under EU terms. However,
the emissions performance of EVs depends on the fuel mix of power generation. In aCopyright © 2019 International Environment and Economy Institute. All rights reserved.

country with a high share of coal in its power generation, the introduction of hybridcars can cut more CO2 emissions than EVs in terms of upstream emissions that
account for the energy supply’s emissions. From the viewpoint of eventual
decarbonization in the future, it makes sense to focus on EVs and fuel-cell vehicles
whose “tank-to-wheel” emissions are zero. However, we also need to consider thetransition from now to then. Whether the elimination of hybrid vehicle from the list ofsustainable technologies is truly a sensible strategy deserves careful consideration.
Setting overly simplistic criteria would run the risk of hampering efforts to transition toa low-carbon economy. Social transformation takes time and criteria for evaluating
technologies should take this reality into account. It is crucial and challenging how toestablish appropriate criteria for encouraging financial flows to businesses activelypursuing low-carbon innovations.
Climate change is a long-term global challenge. It is a difficult issue as well due tofree-riding incentives and scientific uncertainties. To overcome such challenges in an
economically and environmentally sustainable way, the world must work together todevelop innovative technologies and disseminate them at a reasonable cost. We
should always bear in mind that climate change is one of the 17 sustainable
development goals. If energy use is restricted and energy prices are raised for the sakeof a 1.5 degrees target as indicated in the Intergovernmental Panel on Climate
Change’s scenario, it could cause serious trade-offs with other global agendas such as
the eradication of poverty and hunger.
Blaming particular groups and rejecting existing technologies is counterproductive.
What we should do is to prepare a policy and a business environment where low
carbon technologies can be disseminated at a reasonable cost. This approach isreflected in the long-term strategy on climate change recently published by theJapanese government, which spells out a cost-reduction target for key low carbon
technologies.
Japan will host the Group of 20 summit at the end of this month and innovations forlow carbon future will be one of the key topics. I hope the G20 heads of state engage
in constructive and cooperative discussions and work out a tangible collective action on
this crucial issue.

Copyright © 2019 International Environment and Economy Institute. All rights reserved.