We’ve got a climate goal of 1.5 degrees – so how do we get there?

Kate Dooley, University of Melbourne and Doreen Stabinsky, College of the Atlantic

The Paris climate agreement, which commits countries to “pursue efforts” to limit global warming to no more than 1.5℃ above pre-industrial temperatures, sends a much-needed political signal that the world is ready to take serious action on climate change.

But how do we actually go about limiting warming to 1.5℃? The Paris Agreement acknowledges that developed countries need to lead on reducing greenhouse gas emissions, but action in developing countries will also need to be swift, with poorer countries requiring support for a rapid transition to a clean energy future.

While the Paris Agreement has been interpreted as heralding the end of coal and ushering in a new age of renewable energy, it doesn’t explicitly say those things. But the more important question is to ask how the agreement sets the stage for a global energy transition of the scale and speed required to hit the 1.5℃ target.

Article 4.1 of the agreement (see page 22) outlines how global emissions should peak “as soon as possible” and should decline rapidly thereafter, to “achieve a balance between anthropogenic sources and removals by sinks of greenhouse gases in the second half of this century”.

This ambiguous wording is intended to reflect the recommendation from the latest Intergovernmental Panel on Climate Change (IPCC) Assessment Report that emissions will need to go to zero and then below (“net-℃zero”) in the second half of the century.

The Paris Agreement’s accompanying decision text suggests a specific pathway for getting below 2℃ of warming, which involves reining in global greenhouse emissions to 40 gigatonnes in 2030, rather than the currently projected 55 Gt. It also suggests commissioning a special report from the IPCC to look at the numbers that would get us to 1.5℃.

The problem with these numbers is that for 40 Gt by 2030 to be consistent with a 2℃ temperature limit, this would require large volumes of carbon to be removed from the atmosphere later in the century (known as negative emissions). Getting beyond this to ensure that we hit a 1.5℃ is likely to rely on even higher volumes of carbon removal later in the century.

What are negative emissions?

Achieving negative emissions involves a form of geoengineering known as Carbon Dioxide Removal (CDR). Options for negative emissions include large-scale forest plantations, bioenergy crops with carbon capture and storage, or directly capturing carbon from the atmosphere. As well as technology limitations, these options are severely limited by the scale of land required.

Of the scenarios in the IPCC database with a 50% or greater chance of limiting warming to below 2℃, around 85% assume large-scale uptake of negative emissions. For 1.5℃, all scenarios rely on even larger volumes of negative emissions.

Relying on taking carbon out of the atmosphere later in the century brings a risk that we might delay action in the next few critical decades while waiting for the technology to catch up). This could result in runaway warming if the negative emissions options prove to be unfeasible or too expensive, or socially unacceptable.

What next?

Pathways for delivering the 1.5℃ goal will require unprecedented action. If we carry on burning fossil fuels at current rates, our likely chance of achieving 1.5℃ would be blown in just 6 years (a likely chance of 2℃ gives us 20 years of emissions at current rates).

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This highlights that, rather than incremental action, immediate and aggressive emission reductions are needed in rich nations, in order to keep the need for negative emissions options to an absolute minimum, or (for a 2℃ pathway), to avoid relying on carbon drawdown at all.

The special report to be produced in 2018 by the IPCC will offer an opportunity for a more informed debate on the level of negative emissions that might be feasible, and the level of action that will be needed over the coming decade in order to limit our reliance on drawing carbon back out of the atmosphere in the second half of the century.

Keeping global warming below 2℃ or 1.5℃ of warming over pre-industrial levels is still within reach, but it will require an honest and informed picture of the scale of the challenge, and a clear-eyed appreciation of the risks if we delay.

Kate Dooley, PhD candidate, Australian German Climate & Energy College, University of Melbourne and Doreen Stabinsky, Professor of Global Environmental Politics, College of the Atlantic

This article was originally published on The Conversation. Read the original article.

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As big business goes green, green bonds ready for takeoff

Usman W. Chohan, UNSW Australia

The climate summit in Paris has shown that global big business is now also on board with the transition to a low-carbon economy.

However, the most promising instruments in finance for promoting green investing, particularly green bonds, have been around for almost a decade now, starting with the European Investment Bank (EIB) Climate Awareness Bond in 2007.

Why haven’t green bonds entered the mainstream of finance, and what is holding them back?

To be clear, the rise of green bonds has been dramatic: whereas issuances amounted to only US$4 billion in 2010, they were nearly ten times that amount by 2014, representing US$37 billion in new issuance volume. However, green bonds haven’t yet achieved a critical mass because their growth stems from a small base, given that global fixed income constitutes US$80 trillion in outstanding value.

An important factor constraining the wider proliferation of green bonds is the fact that their issuance is still relegated to a few large players. The largest emitters of green bonds remain the large multilateral development institutions which collectively accounted for almost half (44%) of new issuances in 2014, while the corporate sector accounted for another one-third of the total.

The World Bank alone has conducted 100 green bond transactions in 18 different currencies that cumulatively represent more than US$8.5 billion.

Having such a concentrated base of issuers is insufficient for a wider introduction of green financial instruments, and new institutional players, particularly private sector entrants, are required to enlarge the green bond market.

Looking back, an overarching reason for limited private sector participation in green bonds was that “green credentials” were less important in past corporate cultures. However, with the cultural shift taking place as seen at COP21, more entities are expected to “green-up” their business models.

It is important to note that, because green bonds are properly certified as climate-friendly financial instruments, they only represent a portion of a larger, more loosely defined “climate-aligned” bond market.

While not officially labelled as “green” bonds according to environmental rubrics this market accounts for more than US$600 billion.

The green bond market also suffers from a lack of project diversity. For the broader “climate-aligned bond market” that includes green bonds, the two largest segments are transport (nearly 70%) and energy (another 20%), but transport is almost entirely rail networks backed by state entities. Only 10% of the “climate-aligned” market covers the remaining construction, agriculture, waste management, and water categories.

It is heartening to see that developing countries have taken the lead in issuing “climate-aligned” securities (not necessarily certified as green bonds), with China alone accounting for 33% (US$164 billion) of the climate-aligned issuances. India (US$15 billion), Brazil (US$3 billion), and South Africa (US$1 billion) are also among the emerging markets engaging in the climate-aligned capital raising process.

In Australia, the scope for green bond issuances is extremely promising, but in the context of the overall Australian A$1.5 trillion bond market, green bonds still reflect a minute portion of the issuances, and the country has generally lagged behind in its adoption. This is partly due to regulatory uncertainty and political hostility. However, there’s actually a strong interest in green bonds in Australia, as the 2015 green bond issuance of A$600 million by ANZ bank and this South Australian A$200 million wind farm project evidently show.

In fact, most of the major Australian banks, including NAB, Westpac, and ANZ are dipping their toes in the space. To facilitate stronger growth in Australia, however, non-bank financial institutions will also need to be part of the equation, which is why it is encouraging that sectors such as the property market are turning to green bond vehicles for raising capital.

The outlook on market volume growth for green bonds is overwhelmingly positive. Some forecasts are suggesting the green bond market will treble again this year as it did in 2014, touching US$100 billion. Given the growth and engagement on the “greening” of finance, green finance could soon become mainstream.

Usman W. Chohan, Consultant, World Bank Institute (previous); Doctoral Candidate, Economics, Fiscal Policy Reform, UNSW Australia

This article was originally published on The Conversation. Read the original article.