By Santiago Alonso Lorenzo, Head- Green Climate Finance, WWF Global Climate and Energy Initiative
“The most important challenge that the global economy faces is climate change”. Do you know who said that last year? It might not be who you think…
Let’s start from the beginning. The beginning of 2013 that is when World leaders and the business elite gathered together at the World Economic Forum (WEF), the annual meeting of power-packed political and financial leaders debating the global financial sector.
At the heart of the WEF 2013 was the address from Christine Lagarde, the head of the International Monetary Fund (IMF). As the head of the most influential international financial institution her address was expected to be key to understanding the drift of the world economy.
A surprise was in store. Christine Lagarde’s remarks were not only about how the recovery from the 2008 financial shock was progressing, but she outlined a new and more critical challenge for all the attendees to take into account. She said:
“The most important challenge that the global economy faces is climate change”.
Why did she say that?
Firstly, climate change is not only about global warming.
The long-term trend is that the average temperature of our planet is increasing and we are well on our way to beyond the 2°C agreed by the international community in the UN process.And a changing climate means there will be huge changes in ecosystems, as we know them today:
- Coastal shorelines will be affected
- Large number of cities across the world will face direct catastrophic effects of rising sea levels
- Increasing ocean acidity will directly affecting fisheries
- Different weather patterns mean food production chains will be at risk
- New health challenges will arise
In short the world will not be the same and the risk to the environment and the people will be accompanied by a strongrisk to the economy!
But how do we keep this from happening?
If we want to keep global temperature rise below 2°C (WWF stands for 1.5° as a stronger threshold to keep ecosystem resilience) as agreed by the international community, we must keep more than 2/3 of the proven fossil fuel reserves in the ground.
If governments are to honour their commitment to stay well below 2°C, then strict regulations and market based measures need to be in place. This means that there will be an increasing likelihood that large amounts of fossil fuel reserves will not be extracted and used in the future.
But what will happen to those corporations holding assets valued with fossil fuel reserves? They are already possibly overvalued with stranded assets! This will be an important economic loss for many shareholders.
What does this mean for energy use?
Energy is the driver for any economy, society, or system. Until now, the world has been obtaining energy primarily from fossil fuels- coal, oil, and gas – which fuelled the industrial civilization and increased the standard of living for many around the world. But fossils are a fuel of the past. To keep a sustainable growth path for the future and maintain the high standard of living we need to change our energy systems NOW!
What can we do?
The good news is that there are solutions. Alternative energy technologies that can supply most of the energy needed by our societies and drastically reduce our dependence on fossil fuels exist today.Governments and the financial sector need to ensure that the technologies become widely competitive and reliable; wind, PV solar and geothermal can lead the change and are already getting there in some great examples across the world.
BUT despite knowing the truth, governments continue to spend 1.9 trillion US dollars annually in subsidies to carry on using polluting fossil fuels. Meanwhile, the new, clean renewable energy sector only gets 88 billion US dollars of subsidies annually.
The world has recently witnessed renewable energy becoming a profitable business during the last decade. This isn’t anymore a pure conservation argument; it is pure economics!
This year, we are challenging financial institutions, development banks and state pension funds- those who control big investments across the world -to place at least $40 billion USD of new and additional investments into renewable energy by 2017. Nearly a trillion USD of investments into renewable energy are needed annually by 2017, if we are to find an answer to climate change and develop in a sustainable manner. We are asking governments and financial institutions to step up in the direction of renewable energy. We’re asking them to act now. We’re asking you and them ‘Seize Your Power’.