By Graciela Chichilnisky
Director, Columbia Consortium for Risk Management, and Professor of Economics and Statistics, Columbia University
The opportunity at this junction is for wealthy nations to help themselves while assisting developing nations to build their own energy infrastructure — and at the same time help avert climate change.
Developing nations need energy to protect themselves from the extremes of climate change, as well as to develop and fight against poverty. Adaptation and mitigation efforts need energy. The International Energy Agency reports that the largest increases in energy demand in the next decades will come from developing nations, rather than from wealthy nations.
This situation provides a uniquely profitable opportunity for U.S. energy industry to help build power plants where they are needed most, focusing the industry’s efforts in regions of the world with the largest increases in energy demand. Clean energy is of course a great new area of business, and it includes building solar, wind and other clean power plants, all of which increase energy available without producing emissions. The strategy is one of the smartest moves that the energy industry can make at this stage. As reported by Rep. Markey, for example, a recent McKinsey study noted that 80 percent of India’s 2030 infrastructure remains to be built.
This strategic opportunity for the energy industry was discussed since the first days of the Copenhagen conference.
But there is a further opportunity that has not yet been observed, and has the potential to transform the investment strategies of the energy industry worldwide while helping the poorest developing nations achieve funding for their infrastructure from the Clean Development Mechanism of the Kyoto Protocol. It could help resolve the current impasse between the industrial and developing nations about funding for adaptation and mitigation of the extreme damages produced by climate change.
All that is needed to achieve what is proposed here is the adoption of appropriate emissions limits to continue existing ones post 2013. Because of the carbon market, such limits will automatically unleash the positive business changes that reported below.
New technologies that suck carbon from air are available today, as reported recently by Dr. Pachauri, head of the Intergovernmental Panel on Climate Change. These technologies allow power plants that co-generate power production with carbon capture from air to be built. The approach has the ability to suck more carbon than what is produced, namely produce “negative carbon” – or a “carbon sink” namely an area that absorbs more carbon than it emits.
Power plants of this sort could be built with funding from the Kyoto Protocol Clean Development Mechanism, as they clean the atmosphere. The process can also be very profitable for the energy industry, as it adds the value of carbon credits to the value of the electricity sold when built in poor nations. This can make the world’s energy industry a best friend of the environment as well as a major investor in developing nations energy infrastructure.
The solution proposed here favors the wealthy nations’ energy industry, as it increases its exports and creates domestic employment. It also favors the developing nations who get to build new energy infrastructure. When coupled with the “negative carbon feature” that is mentioned above, this ensures that funding can be achieved from the Kyoto Protocol mechanism for regions such as Africa, Latin America and the Small Island States that until now could get little in terms of CDM investments. With this approach these nations can capture more carbon than they emit.
The approach is therefore attractive to developing nations as well as to private investors in developed nations who routinely invest in the energy field.
On this basis, I have proposed the creation of a $200 bn/year private fund to be underwritten by OECD nations (so as to reduce the largest slide of risk) designed to build power plants that suck carbon from air in the poorest nations of Africa, Latin America and Small Island States.
These plants can sell power as well as carbon credits, thus obtaining funding for their development. Developing nations from low emitting regions can be compensated with carbon credits for reducing more carbon than what they emit (negative carbon). The fund I propose could well become a solution for the current impasse in Copenhagen, as it will bring substantial funding and energy that are needed for adaptation and mitigation in developing nations. It will also favor employment creation and exports from OECD nations, and would be part of a strategy of focusing in demand growth areas that favors the world’s energy industry in OECD nations.
I welcome Rep. Markey’s response to the proposal presented here, and how it could perhaps help the passage of his excellent climate change bill when it goes to Senate.