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Jeffrey Sachs on climate change: We’re all kidding ourselves that anything’s being done

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Jeffrey Sachs pulls no punches on climate change

The transcript of Professor Jeffrey Sachs, Director Earth Institute, Columbia University, speaking at the ADSW Global Leaders’ Summit, part of the World Future Energy Summit in Abu Dhabi on 20 January 2014.

Moderator Nima Abu Wardeh: Jeffrey, you wrote a book called The Price of Civilization, is it that the price is that some people must get left behind?

JS: “The idea of The Price of Civilisation is that we ought to pay the price to have this civilised world but we’re not paying that price and unfortunately we’re not really sorting this problem that we’re here to talk about. Climate change is progressing rapidly, people who watched the Australian Open this week saw players fainting on the court because the temperature was 45 degrees centigrade everyday in Melbourne, an unprecedented heat wave. A couple of days ago the Governor of California declared a drought emergency, there are massive floods in Sulawesi that are claiming large numbers of lives right now, ladies and gentlemen, do not believe we are solving this problem. We are not solving this problem yet. And while there is lots of investment in renewable energy, there is lots more investment in coal oil and gas that is continuing to wreck the planet so it’s one thing to say there’s more investment in low carbon energy, it’s another thing to say that we’re really changing the realities, so far, no.”

Moderator: What needs to be done?

JS: “We don’t have governments making serious plans to take into account arithmetically how much the energy systems need to change. This is an arithmetic problem, it’s called the ‘carbon budget’, the atmosphere can only absorb so much carbon without having terrible effects in the world and we are not respecting the global carbon budget. And where we have countries that are not making serious plans to respect the carbon budget but are only talking about the nice things they’re doing, not the harmful things they’re doing, then we trick ourselves, we think we’re making progress but in fact we’re simply fooling ourselves, because nature does not care how many solar panels we have, nature only cares about how much carbon dioxide is being emitted by our fossil fuel use. That continues to rise rapidly and that is what we really need to face because we need a change of system, not simply more of the renewable. That’s great but if it doesn’t actually reduce the other; the part that’s damaging us. We’re not solving our problem.”

Moderator: So when you hear about goals, targets, I’m talking about the targets that exist at the moment, what do you think, are we doomed? Is there no point?

JS: “Of course I don’t think we’re doomed, I’m here because I think we should open our eyes to reality.”

Moderator: My point is that the targets are not enough?

JS: “Look we know, scientists have shown us what it would take to have a two degree centigrade world. Now, let me explain what that means, we’ve already increased the temperature on the planet by nearly one degree; one more degree and we reach tipping points that are extraordinarily dangerous for our children but we’re not on the path of two degrees, we’re on the path of four degrees right now. Even the mainstream report of the International Energy Agency, which is the leading organisation for keeping this data, their mainstream forecast is a four degree centigrade world. You can’t even imagine how dangerous that could be, where’s the food going to come from? What is the quality of life going to be? And that’s the reference path of the International Energy Agency, so we’re still playing games. Because we have nice projects but nice projects do not solve the problem and we know scientifically what it would take, we’re emitting about 35 billion tonnes of C02 this year. By 2050, in a much larger world economy, we have to be emitting less than 15 billion tonnes. So the world economy is going to grow by three times but we have to cut back by more than half our carbon emissions, what does that mean? It means keeping the coal under the ground, it means changing to electric vehicles, it means radically different building codes, it means facing the fact that our energy, when we produce power, has to be emitting about 100 grams of C02 rather than 700 grams per kilowatt hour [of electricity generated]that is now emitted when we produce electricity, in a way this is straight forward arithmetic but our political systems do not want to face straight forward arithmetic because it means making choices. It means telling the coal industry that unless you have carbon capture and sequestration, the coal must stay under the ground. It means saying to the oil industry that by 2030 our vehicle fleets must be electric powered, they cannot be internal combustion engine if we’re serious about this problem. So far we’re not serious about the problem, I pity our children and I’m scared for them because we’re not facing the honest carbon budgets of the planet.” Moderator: So when you look at the economic climate of the world, how does behaviour change when times are good versus when times are bad? JS: “It doesn’t change very much, our politicians have a short term time horizon and the short term is continue to produce fossil fuel, that’s how we’ve grown up and that’s what the engineers know by and large and that’s how the world continues to grow. You look at how many new coal-fired power plants, more than 1000 are in construction or been approved for development right now. We are increasing the number of internal combustion engines by hundreds of millions in the next 20 years. What are we doing!? It’s not so hard to do a spreadsheet to show how we are moving to a dangerous planet but we don’t hear any of that in these discussions, we only hear the good news, we don’t hear the bad news and that’s the problem. We have to get real about a different direction, which is a different kind of energy system. One that is low carbon. The only low carbon sources are nuclear, wind, solar, geothermal or carbon capture and sequestration. There is no low carbon vehicle system except if we move to fuel cells and to battery. This is straight forward, so we have to make those choices and that’s what global agreements should be doing.

“Some individuals are attacking me on Twitter right now, asking did I fly over here in a bio-fuel airplane, of course I didn’t! I have no choice; the airlines do what they do. They say, did I drive in an electrical vehicle when I rode over to the conference centre? Of course not, I rode in a regular internal combustion engine, that’s not an individual choice. And when I power my computer, they ask, is it being charged by low carbon energy or not? We can’t do this as individuals; these are systems we’re operating with higher technology systems. Our energy system need to change and as individuals we need to take responsibly for telling our governments not to wreck the planet. But they are wrecking the planet because unfortunately politics operates with inertia. But this is an important meeting, here you have leading renewable energy but we need to respect the carbon budget and that means it’s not good enough to do renewables, it only counts if we also stop doing the damage, and since the world population is growing; since the world economy is growing, it’s very easy to do lots of nice things but also extremely damaging things at the same time, I want to hear from the oil companies, what is their arithmetic on carbon?”

Moderator: Do we have any questions from the audience? Any oil companies that want to answer this question?

JS: “I’m serious, it’s not a joke. Let’s have a serious discussion about the carbon budget for the planet because we increased 2.5 parts per million last year of C02. We reached 400 parts per million, the highest level in three million years on this planet, I study the trajectories every day with my colleagues and we are on a four degree centigrade increase trajectory right now, as our reference point so it’s not a joke, it’s the real thing, it’s why we’re all here, we’ve all spent a lot of money and burned a lot of CO2 to get here but to solve a problem, so I’d love to hear from an oil company executive, how are we really going to do this?”

Moderator: Any questions from the audience?

Young man from Peking University: ‘We know the bad side of old energy system but what is the bad side of new energy systems? Is there anything we should know before we change from the old to the new system? How to protect ourselves?’

JS: “Excellent question, you’re from Peking University? There is no energy system that is completely harmless, no energy system so we have to make choices. The problem is that our fossil fuel-based energy system is the most dangerous of all because it is leading to global scale change that is unprecedented in the geologic history of the planet. It threatens the fundamental survival of at least hundreds of millions of people this century so I personally support nuclear energy for example, not because it’s perfectly safe but because it’s safer than a fossil fuel energy system. I support wind and solar power, not because it’s perfect, they use land, they threaten the local environment but they don’t threaten the global environment in the same way. So we have to make serious choices but we should understand it, since you’re from Peking university, every time you step outside, you cannot breathe the air and your eyes water and you can’t even see because the last time I flew into Beijing, I had to circle for an hour because there was no visibility to land at the airport. That’s the problem with coal, China has to move beyond coal because it’s damaging, it’s killing people, it’s leading to disease and it’s also the number one cause of greenhouse gas changes now. So there is no perfect system but it’s the relative problem that needs to be fixed.”

Moderator: Next question?

Hi, I’m Erik Brynjolfsson from MIT. What are some of the policies we should be advocating and what’s the mix between advocating for specific mandates on renewables; for carbon taxes or carbon caps, for subsidies, what are the ones that will be most effective in achieving the goals you’ve outlined?

JS: “If you do the arithmetic ladies and gentlemen, and thank you for the question Erik, Erik has written a wonderful new book called The Second Machine Age, I recommend it for everybody, if you do the carbon arithmetic, we need to get from 35 billion tonnes per year to about 12 or 13 billion tonnes a year by mid century. In per person terms, right now there’s seven billion people on the planet so we’re about five tonnes per person, and there will be nine billion people by mid century so we need to get to about 1.6 tonnes per person, in a global growing economy. In order to do that, you need plans. Plans! Governments need plans, this takes 40 years to make the energy infrastructure. The US has never made an energy plan. Never. To this day, we have brilliant secretaries of energy, like Professor Ernest Moniz of MIT, one of the world’s smartest energy experts, we had a noble laureate just before him, Steven Chu but the political advisors don’t let them make plans, so we operate without any clear guidance. If you asked how could we get to 1.8 tonnes per person, you have to do everything, you have to go to electric vehicles, you have to go to clean, low carbon electricity systems, you have to go to very well insulated, air-locked buildings that use about one fifth of the energy, you have to go to smart grids of the kind that Erik talks about in his book. You have to do everything because it requires very radical transformation that means operating on many different fronts, not one magic bullet. And that will require 30 or 40 years of change with concerted effort globally, global co-operation on all these new technologies. We’re not serious about this yet ladies and gentlemen, we’re just telling ourselves nice stories. We’re not solving the problem yet because solving the problem requires long a term vision and a policy to support that change. All the technologies we need are either available or already in view even if they’re pre-commercial but we need to work on them, there are learning curves, there are dynamics that will lower the cost tremendously just as the US secretary of energy said a few minutes ago, the costs have come down already by about 70 per cent for some of these key energy sources but as long as it’s absolutely free to put carbon dioxide up in the air, as long as that’s free, we’re still going to continue to wreck the planet because we’re allowing the total externality of just damaging the planet without facing the real social consequences. No-one here wants that for the next generation, believe me, we’ll get by, at least at my age I’ll get by but my children will suffer terribly and I really think that’s unwise and unwise for your children too.”

Q: “In Germany we now have a plan put out by a UV installation company for wind and solar, who thinks that Germany could be at 100 per cent renewable power by 2020. We have a new minster now of energy and economics who comes from the coal-rich rural area and of course who is scared of losing jobs, could you talk to the point of the jobs evidence of moving from the old economy to the new circular, renewable economy, what is the impact on economics? And is worthwhile for Germany to take the lead or for Abu Dhabi take the lead on renewable energy, irrespective of the loss of jobs and the potential of new jobs.”

JS: “I don’t think there will be jobs lost per se, I do think that some of the new energies will be more expensive than the market prices of old energy if you don’t take into account all the social costs associated with the old energy. So there’s an accounting trick, when we burn coal right now, as Germany does, nobody that buys that coal-fired electricity pays the true social cost of ruining the climate or causing health problems so it’s an accounting problem. The coal gets off cheap whereas what’s really cheap for the planet, renewable energy, looks expensive that’s because our market system is flawed. The market system is not God, the market system is a flawed creation that doesn’t properly measure the true social costs and benefits of alternative technologies yet we treat it as something reverential, that it’s only the quarterly earnings that count because that’s the most important thing that drives our businesses these days. So we have to correct that impression, that understanding, and correct the market pricing. If you look at Germany, Germany said they wanted energy transition but they’re burning more coal then ever right now so we’re going backwards. Now I wouldn’t say to the Minister that you have to do it by 2020 but I would say that you have to do it and don’t back down from the energy mandate, the energy transition, it’s a wonderful initiative. But for Germany to do it effectively it should be done in a energy grid that doesn’t rely only on Germany’s wind and solar but on the wind and solar power of North Africa, of the North sea, of the Middle East… all in an integrated system. You put concentrated solar power in the desert here and then with high-voltage direct current, bring it to Germany. This is very do-able technologically, that’s why the Desertec idea of an integrated system of a Middle East, North Africa and Europe is truly the way of the future but there’s a lot of energy nationalism right now so Germany says ‘we only want our own wind’ or ‘we only want our own sunshine’ that will raise the cost considerably. Or, ‘forget it, we’ll go to coal because we want jobs’ that’s even worse. If we think about this systematically, clearly, with expert engineering, there are great solutions for the planet. Better systems, better transport, better buildings, better quality of life, cleaner air, survival of the planet. But it’s not the course that we’re on right now, because the market is filled with tricks and the tricks for the political market is decide things with a one year time horizon and the economic market is decide things with a quarterly time horizon based on flawed incentives that don’t measure proper social costs.”

Q. [Identified himself as an asset manager] My question is about financial markets… you’re talking about the carbon budget and if you compare how much proven reserves are with those oil companies, with how much carbon budget there is, there is already two to three times more proven reserves that can ever be emitted. Can we find a trick to get oil companies to buy in, that it’s a good idea not to burn all this oil, do you have some thoughts?

JS: “It’s an interesting question how these reserves are going to be distributed. Basically what we need to do is to say, we’re going to use the reserves that we have of oil and gas by and large, keep the coal under the ground and not continue to develop unconventional new sources. So that all the oil companies here that are finding new sources, what are we going to do when we burn those? We don’t need that, we need by then to have shifted to different kinds of energy sources. We should not be exploring for new oil and gas right now, we have enough in reserve to meet the carbon budget so everything of the billions or tens of billions of new exploration makes no economic sense for the planet. It makes sense for the private investors; it makes sense for the politicians but it doesn’t make sense for the planet. If we looked at this honestly, instead of investing ten of billions of dollars in new oil and gas when we have enough already, we would be investing that same money in the energy transition worldwide and then it would be clear for investors also because the current situation is that investors are going to find at some point they’re going to suffer a major capital loss when the world finally decides that it’s not going to be organised to destroy itself, but it’s going to be organised for its survival, then everybody is going to be shocked, ‘why did we produce so many reserves?’ So one way to do this is to give the production rights to those who have the reserves right now, run down the reserves, let the market price be very high, that would be good for the Middle East and good for the oil companies, I don’t care about that, that’s fine, but don’t produce more reserves than we can use so let the existing reserve holders produce the oil and gas for the next 40 years but then let’s understand that we’re on a dropping diet of fossil fuel and we’re on a rising diet of low carbon energy and the current shareholders would do just fine but the companies wouldn’t waste their money with tens of billions of dollars of finding reserves of things that can’t be used safely in the world. This is the big mistake and it comes because our financial markets are even more short-sighted than our politicians. It used to be that great banks financed great industry, they’d invest in a 20 or 30 year forward industry but you look at our great banks right now, they’re all short-term traders, they don’t even know how to finance an industry any more, all they know is quarterly returns so all they want to do is trade existing securities, they don’t know how to finance a new energy sector for the world, so that’s my challenge for Wall Street or the city of London, stop being traders, start being investors again and that means creating a new energy industry not simply trading the shares of the existing energy industry, which is what they do because all of these companies are led by traders right now, not by industry builders. We need new industry. In Europe, go to the pension funds directly, go to the insurance companies. The big mistake is we have long-term savers who put money in their pension funds, you know what the pension funds do? They put money into short-term money management. So we destroy the maturity of the financial system. You have long-term savers who end up investing in short-term assets, managed by short term traders whereas companies like yours should go to the pension funds directly and say ‘help us finance a 30 year infrastructure project of clean energy’. Don’t go to Goldman or someone else because all they’ll do is trade short term, we’ll do long-term financing and that’s better for the pensioners because the pensioners right now are suffering terrible capital losses from the short-term trades of the hedge funds where you could be building a new long term industry and giving them good retirement returns, that’s the way the world financial market should work but it doesn’t work that way right now, it’s become just infinitesimally short term and short-sighted.”

Moderator: Jeffery Sachs, thank you.

Professor Jeffrey D. Sachs is the Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management at Columbia University. He is Special Advisor to United Nations Secretary-General Ban Ki-moon on the Millennium Development Goals, having held the same position under former UN Secretary-General Kofi Annan. He is Director of the UN Sustainable Development Solutions Network. He is co-founder and Chief Strategist of Millennium Promise Alliance, and is director of the Millennium Villages Project. Sachs is also one of the Secretary-General’s MDG Advocates, and a Commissioner of the ITU/UNESCO Broadband Commission for Development. He has authored three New York Times bestsellers in the past seven years: The End of Poverty (2005), Common Wealth: Economics for a Crowded Planet (2008), and The Price of Civilization (2011).

Jeffrey Sachs on climate change

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