Working Paper
Glimpses Of Hope: A Global Green New Deal Is Feasible
Author(s):
Fesenfeld, Lukas Paul Publication Date:
2020-10-19 Permanent Link:
https://doi.org/10.3929/ethz-b-000447469
Originally published in:
SSRN , http://doi.org/10.2139/ssrn.3709074
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Glimpses Of Hope: A Global Green New Deal Is Feasible Author: Lukas Paul Fesenfeld1*
Affiliations:
1ETH Zürich, Department of Humanities, Social and Political Sciences, Switzerland.
*Correspondence to: lukas.fesenfeld@ir.gess.ethz.ch
Abstract: The evidence is clearer than ever before. We are in the midst of a climate crisis and risk crossing tipping points that trigger runaway climate change. The scientific consensus is that we need to transform our societies now to achieve the 1.5 °C target, but in light of unambitious international climate policy efforts, many doubt effective mitigation is realistic in the near-term.
While the window of opportunity for effective mitigation is closing rapidly, there are glimpses of hope that a Global Green New Deal is feasible to prevent self-accelerating climate change before it is too late.
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Scientists, schoolchildren, and citizens around the world have joined a chorus demanding urgent climate action (1–3). In particular, interacting climate tipping points — such as permafrost thawing or the loss of the Amazon rainforest – could lead to irreversible and self-accelerating climate change (1). Global warming must not exceed 1.5 °C to minimize such risks. To achieve this ambitious goal we urgently need to mitigate both long-lived climate pollutants like carbon dioxide (CO2), but also powerful short-lived pollutants like methane (CH4) (4). Irrespective of these undisputable risks, today’s mitigation efforts fall short of what is needed to effectively prevent the looming climate catastrophe.
Social scientists have outlined a number of socio-technical hurdles as to why human societies fail to adequately deal with the existential risk of climate change, and eventually collapse. First, humans tend to exhibit a strong short-term bias and heavily discount potential future risks and benefits (5, 6). This short-term bias is embedded in political and economic institutions (e.g., electoral cycles, company report standards) that tend to privilege short-term gains over long-term oriented investments (7). Second, politicians tend to focus on avoiding public blame and reducing political risks of costly but effective mitigation. Many decision makers hold the belief that citizens are not willed to pay the price for effective mitigation (8). What’s more, many citizens seem to hold similar beliefs, and perceive other members of society to be non-supportive of investments into effective mitigation (9). Political polarization and populism are on the rise and some people have raised serious doubts about the scientific consensus on the severity and human responsibility for climate change (10). Distrust in scientific evidence on climate change opens up space for opponents of effective mitigation measures to slow down or even prevent climate action. Third, powerful incumbent industries show little interest in carrying mitigation costs with uncertain benefits for themselves. Collective action theory predicts that strong lobby groups of fossil fuel and other pollutant industries prevent effective mitigation because of their homogenous interests and large conflict capacities (6). Fourth, global public goods theory forecasts that successful international cooperation for mitigation is difficult to achieve given that actors have the incentive to free-ride on the mitigation efforts of others (11). Finally, many argue that carbon lock-ins inhibit rapid system transformation (12). The coevolution of encultured habits and norms with path dependent technologies and infrastructures makes it difficult to change institutions and escape the inertia entrenched in systems. This in turn privileges incumbent actors opposing effective mitigation; they can leverage their privileged position in existing sociotechnical systems and use
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all available resources to stop system transition and counteract pressure for ambitious climate policies (13).
Despite all these formidable hurdles, I argue that glimpses of hope and windows of opportunities exist for transforming our societies through an ambitious «Green New Deal». There are good reasons to believe that there are not only climate tipping points (1) that trigger irreversible changes through a relatively small change in a system, but also socio-technical ones that could accelerate the transformation of our societies (14). In essence, feedback effects may not only turn into vicious, but also virtuous cycles of change, and such interactions within and between different socio- technical subsystems can lead to a rapid transformation in line with the 1.5 °C target (14, 15).
First, the characterization and perception of climate change as a long-term problem is changing.
Many citizens already perceive climate change as a serious problem today (16), and focus events like wildfires, droughts and storms are turning public and stakeholder attention to the short-term costs and benefits of climate mitigation. Such events do not only open a window of opportunity for societal movements (e.g., the Fridays for Future movement) to emerge and to increase public pressure for ambitious climate policy, but also lead companies and investors around the world to recognize their risks and exposures to a changing climate. It is not surprising that last year one of the leading global rating companies, Moody’s Corporation, purchased a data firm that measures climate risk exposures of companies, cities and states. In addition, the insurance industry now seeks a reliable quantification of climate risk exposures, and puts pressure on its customers to take those risks into account. Even powerful incumbent industries are starting to realize the near-term risks of climate change for the very core of their business models. For example, the Brazilian agro- food industry, which has long been accused of being one of the major drivers of Amazon rainforest loss, is becoming increasingly aware of its dependency on a functional forest and regional climate system to provide, for example, enough irrigation for its intensive agriculture. These companies also receive increasing pressure from international investors concerned about their assets in face of increasing climate change risks. Researchers and consultants can increase the probability of influential industries and investors to realize their near-term exposures to climate change impacts and hence turn humans’ short-term bias into an advantage for effective climate mitigation.
Second, the last two years have shown that politicians do not necessarily need to be overly concerned about public backlash to ambitious climate mitigation. Green parties around the world
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have gained momentum and recent survey experiments show that across major economies – like the US, China, India, Germany, South Africa, or the UK – a majority of citizens supports climate policies with perceptible mitigation costs (e.g., policies that significantly increase the prices of emission-intensive goods like fossil fuels or meat products (17–20)). While citizens seem to be willed to carry some of the mitigation costs, the French gilets jaunes protests against higher motor fuels remind us of the key importance of smart policy design to avoid public backlash. To achieve public support, effective and feasible climate policy packages should bundle ambitious measures with visible mitigation costs with policies that compensate citizens by including clear benefits for them (19, 20). Credible consideration of fairness principles in policy design can effectively reduce the risks of public backlash (17, 21). For example, the progressive design of the carbon tax in Canada redistributes tax revenues back to citizens and around 80% of households – particularly low-income households – receive higher transfers than the amount paid in direct and indirect costs.
While distrust of the scientific consensus about climate change, populism and political polarization can be hurdles to effective mitigation (especially in the United States), in most countries around the world the vast majority of citizens clearly believe in the reality of human-caused climate change (22). In other words, there is enough political leeway to adopt ambitious climate policy if elites credibly communicate to citizens that they are taking their interests and needs into account (10). The increasing attention that citizens pay to the visible impacts of climate change in their everyday life (e.g., through droughts, wildfires or storms) opens a window of opportunity for politicians to credibly communicate that they are acting in the interest of the common people when adopting an ambitious Green New Deal (10).
Third, although powerful incumbent industries, like the meat and coal industries, used to long be well-organized opponents of ambitious climate policy, the situation for at least some of those players has changed dramatically. Not only do powerful industries recognize the short-term costs and benefits of mitigation, but they also have an increasingly diversified portfolio of products, including clean technologies. For example, some prominent power companies have invested heavily into renewable energies, and leading fossil fuel car producers have advanced alternative engines. Also, large meat producers hold shares of rising vegetarian meat alternative start-ups.
Portfolio diversification leads companies to have less homogenous interests, and lowers their conflict capacities when lobbying against ambitious climate policies. In fact, portfolio diversification leads to ambiguous lobby strategies. In this sense, the predictions made by
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collective action theory can work in favor of ambitious mitigation. International competition through new market players, like Tesla in the automotive industry or Beyond Meat in the food industry, are increasingly changing the odds in favor of incumbent actors’ support for ambitious climate policies. Smart policy design can accelerate this process by sequencing policies that foster technological innovation and the development of new powerful industry players that destruct existing markets and challenge incumbent industries to switch to cleaner technologies and support ambitious policies (23, 24). Researchers and climate policy advocates can broker the exchange between progressive companies and incumbent actors, and thereby help to reduce coordination costs for the build-up of successful coalitions pushing in favor of an ambitious Green New Deal.
While companies prefer policies that distribute mitigation costs to competitors, the wider public or future generations (7), the success of such redistributive strategies is moderated through institutional design, the power of other political actors (e.g., environmental NGOs and industry competitors) and the public salience of the issue (7, 19). The Olson theorem of collective action predicts that consumers and citizens will have to pay at least some price for pollution caused by well-organized companies. Normatively speaking this might appear unfair, yet realistically, in light of the enormous social costs of a further delay of effective mitigation, proponents of a Green New Deal will most likely have to take on a substantial part of transition costs. Both the political debates in the United States and the EU about a Green New Deal show that incumbent companies and countries (e.g., Poland’s coal industry and workforce) demand compensation to break their opposition. The good news is that both the public and front-running green industry players, who will profit from ambitious climate policies, are willed to carry some of the costs (17, 19, 20, 25).
Fourth, the climate club literature offers a way out of the global public goods and free-rider dilemma (11, 26, 27). While there are visible climate clubs at the urban, state and company level, for instance the US Climate Alliance, it is likely that in the near term more influential country climate clubs with ambitious mitigation goals will emerge under the bottom-up designed Paris framework. In other words, powerful (multinational) companies, investor coalitions and governments start to realize the unique market opportunities to position themselves as frontrunners in a low-emission economy, and to commit themselves to higher industry standards and ambitious pollution regulations. The recent EU commission proposal for an EU Green Deal is a good example for this. Ratcheting-up and spillover processes to non-club members can take place once a club reaches a critical size, for instance in terms of the covered market and trading volume. In essence,
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conditional commitments and club goods, such as preferential trade agreements, investments, access to research funding and emissions trading schemes, can increase other countries’
willingness to contribute (26). Studies show that those clubs can even be successful without the participation of the United States (26). Moreover, it might be possible to accelerate climate policy and clean technology diffusion without the presence of a strong club. For example, if either China, the United States, or the EU were to take a credible unilateral step towards transitioning to a climate-neutral society by enacting an ambitious Green New Deal in their jurisdiction (see recent debates in the EU and US), this could suffice to trigger socio-technical feedback effects and diffuse clean technologies as well as more ambitious mitigation policies across the globe.
Fig. 1. Global Levelized Costs of Electricity (LCOE) of utility-scale renewable power generation technologies compared to fossil fuel-fired power generation cost range, 2010-2018. Onshore wind and solar PV power today is often less expensive than any fossil-fuel-fired power option. New solar and wind projects will progressively be even below the operating-only costs of standing coal-fired plants. Continuing cost reductions in renewable and other low- emission technologies (e.g., falling battery costs that enable the electrification of passenger transport) are projected that can accelerate the transition to a low-emission economy. Graph adapted from the International Renewable Energy Agency (28) . The data is for the year of commissioning. The diameter of the circle represent the size of the project, with its center the value for the cost of the project on the Y axis. The thick lines are the global weighted- average LCOE value for plants commissioned in each year. Real weighted average cost of capital (WACC) is 7.5%
for OCEC countries and China and 10% for the rest of the world. The single band represents the fossil fuel-fired power generation cost range, while the bands for each technology and year represent the 5th and 95th percentiles bands for renewable projects.
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Finally, while carbon lock-ins and socio-technical path dependencies may slow down the transition process, it is likely that we have already entered an acceleration phase in the transition of key sectors, like the energy system (29). Renewable energies are diffusing rapidly and in recent years levelized costs of electricity for renewable energy sources have dropped significantly (see Figure 1, and reference (28)). In many countries today electricity based on renewable energy is already cheaper than fossil-fuel based electricity and might have passed an irreversible socio-technical tipping point. In 2019, global electricity production from coal decreased by around 3%, the largest step-down on record. In 2020, we can expect even stronger decline of fossil fuel use and production given the sudden shock of Covid19. This is an example for what some investors and analysts denote as the ‘carbon bubble’ which might lead to massive ‘stranded fossil fuel assets’, and potentially large investment losses (30). The risk of losing vast assets as well as public pressure has inspired a growing divestment movement, including important institutional investors such as the Norwegian state fund. In turn, this outlook motivates an increasing number of companies, but also governments (even in fossil-fuel-dependent countries like Australia, Poland, or Saudi Arabia) to start rethinking their business models, investments and industrial policies. Although the probably single most important global player for achieving the 1.5 °C target, China, is still investing and building coal-fired plants, there are reasons to believe that many of those newly constructed plants will not be utilized on the grid. Moreover, China is also already the global leader in the production of solar cells, wind turbines, energy-saving lights and solar water heaters, and the potential future frontrunner in electric and fuel-efficient cars as well as battery technology (31).
In some sectors (e.g., energy and transport systems), we are now experiencing a more complex interaction of multiple new technologies that have matured over the last decades, and a rapid decay of traditional business models and technologies (29). The interaction between different technological innovations (e.g., rapid cost reductions of lithium-ion batteries, wind and solar energy) within and across sectors (e.g., cheaper renewable energy and lower production costs of electric-vehicles) helps break up existing path dependencies and accelerate the low-carbon transition (13, 29). Policy-induced technological learning has led to rapid diffusion of clean technologies, and can trigger positive feedback effects across countries with comparative advantages (e.g., prices of solar products could decline rapidly due to comparative advantages and synergetic effects between the Chinese, German and US economy) (32). Low financing costs and interest rates create favorable conditions for low-emission technology investments (33), and open
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an important window of opportunity for an ambitious Green New Deal. While the transition in some sectors, like the food and transport systems, depends heavily on the interaction of technological and behavioral change, it is possible that a positive feedback cycle can be initiated through smart policy design. Although habits and norms are traditionally expected to change very slowly, social norm and innovation research shows that policies can trigger tipping points and induce rapid co-evolutionary change of norms, behaviors and technologies (15).
Taken together there are glimpses of hope: While critical hurdles to a rapid transformation of our societies in line with the 1.5 °C target are still in place, there are good reasons to believe that feedback effects within and between different socio-technical subsystems can make an ambitious Green New Deal feasible. Political and economic risks for adopting ambitious climate policies are smaller, and the associated opportunities larger than ever before. Researchers can support decision makers in business and politics to better understand these risks and opportunities, and use all their available measures to accelerate the transformation towards climate neutral societies.
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