Q&A: Combating climate change

Author: Manushi Jain

Date published: 7 Dec 2009

Environment ministers and government officials meet at a UN conference in Copenhagen in December 2009 to reach an agreement on a comprehensive policy to combat climate change. There is, however, a clear divide between industrialised and developing nations as to who should have targets for reducing carbon emissions and who should pay. The attainment of a mutual agreement seems questionable.

Why is climate change important?

The past, present and future - what is being done?

Who are the biggest polluters?

How does it impact consumers and business?

What are the economic consequences?

Why is climate change important?

Climate change is one of the most significant risks facing the world, presenting tremendous challenges to the environment, to governments, to businesses and to the population. As global temperatures and average sea levels rise, there have been irreversible changes to the ecosystem where many plant and animal species are at risk of extinction. Volatility in weather conditions adversely impact agriculture, industry and human health leading to significant damage to world economic output.

The increased concentration of greenhouse gas emissions (GHG), mainly carbon dioxide - CO2, causing global warming, is largely a consequence of human activities amongst which the use of energy is the largest source of emissions. The energy sector is dominated by the combustion of fossil fuels. The share of fossil fuels in the world's primary energy supply has almost remained unchanged at over 80.0% between 1971 and 2007 due to an increase in coal demand of developing countries that drove growth in global emissions. CO2 emissions from fuel combustion are expected to reach 40.2 Gt CO2 by 2030 from 27.0 Gt CO2 in 2007.

The past, present and future - what is being done?

The United Nations climate change conference in Copenhagen (COP15) in December 2009 is expected to be a turning point in the fight to prevent climate change as negotiators and world leaders are tasked with framing a new deal for tackling global warming after the Kyoto protocol expires in 2012.

There is much debate on the future of the Kyoto protocol, which included targets for industrialised nations that would reduce overall emissions of GHG by at least 5.0% below 1990 levels by 2012. The agreement was wounded by the absence of the USA, which signed but refused to ratify it and by massive overshoots in carbon emissions by Canada and Australia. It was also criticised because emerging giants such as China, India and Brazil, which are now major carbon polluters, had no targeted emissions cuts.

Ahead of COP15, many advanced and emerging economies have committed to curb carbon emissions:

The USA announced a target for reducing CO2 emissions by 17.0-20.0% from 2005 levels by 2020 and China pledged to cut the amount of CO2 emitted for each unit of GDP by 40.0-45.0% by 2020, compared with 2005 levels;

The European Union (EU) is unilaterally cutting its CO2 emissions by 20.0% by 2020 compared to 1990 levels, and offering to increase that to 30% if other industrialised nations comply;

Japan has promised an ambitious 25.0% cut in CO2 emissions by 2020 compared with 1990 levels and Canada sees a reduction of 20.0% by 2020 compared to 2006 levels;

Australia's parliament is debating a bill for reducing carbon pollution by 5- 25% by 2020 from 2000 levels, dependent on the outcome in Copenhagen.

Who are the biggest polluters?

In 2008, two-thirds of world CO2 emissions originated from ten countries with shares of China and the USA, the world's largest two CO2 emitters, far surpassing those of others. These two countries alone produced 13.2 billion tonnes of CO2 emissions from fossil fuels accounting for 42.3% of world emissions. Other countries among the top ten polluters include India, Russia, Japan, Germany, Canada, the United Kingdom (UK), South Korea and Iran.

There is a divide between advanced and emerging economies regarding emission targets. Traditionally, industrialised economies have been responsible for the accumulated stock of carbon emissions but the contribution of developing economies has been growing at a rapid pace primarily due to strong economic growth and increasing use of coal:

The combined share of China and India in world CO2 emissions is expected to increase to 34.0% by 2030 from 28.1% in 2008. However, per capita emissions in these countries are much lower than counterparts in North America or Western Europe. In 2008, while per capita CO2 emissions in advanced economies like the USA and Australia stood at 19,322 kg and 20,619 kg respectively, they were much lower in emerging economies like China (5,507 kg), India (1,258 kg), and Brazil (2,073 kg);

Moreover, emerging economies contend that advanced economies have a 'historic responsibility' as they used up a large part of the safe carbon-absorbing capacity of the atmosphere and should compensate developing countries;

Many analysts believe that reduction in carbon emissions of advanced economies is merely because manufacturing has increasingly been outsourced to developing economies, contributing towards their rising CO2 emissions.

How does it impact consumers and business?

The growing threat of climate change is well known to business and consumers who are at risk from the increasing volatility in weather conditions and rising sea levels, which trigger earthquakes, tsunamis, avalanches and volcanic eruptions. According to a study by the United Nations Office for the Coordination of Humanitarian Affairs and the Internal Displacement Monitoring Centre, 200 of 221 natural disasters in the world in 2008 were climate-related. Over 160 million people were affected and around 20.3 million were displaced. Africa is particularly vulnerable to the threat of low water supply while Asia remains the most affected region accounting for over 85.0% of total displaced in 2008.

For businesses, there is an effect on insurance markets, business resources and mounting legal and regulatory pressures. Nonetheless, climate change also provides new opportunities such as participating in carbon-trading markets and development of cleaner energy resources. Many companies are taking a lead in reducing greenhouse gas emissions by implementing actions that save money, improve productivity, protect the environment and boost the environmental credentials of their brand.

With growing awareness, consumers are seeking products and services that would minimise their contribution towards climate change and are adopting 'greener' lifestyles. Higher energy prices will mean consumers shift from using cars to public transportation and lower-emission modes of transportation. Such measures will help secure domestic fuel supplies and could help reduce oil prices. Nonetheless, transforming to renewable energy sources is likely to be more expensive for both consumers and businesses. For example, in the UK, almost a third of the average domestic fuel bill will be siphoned to fund the construction of renewable energy sources and other government green initiatives. Green subsidies for an average household are expected to rise to £500 (US$806) annually by 2025 from £100 (US$161) in 2009.

Carbon offsetting has also gained some appeal and momentum mainly among consumers in western countries. Many companies offer carbon offsets as an up-sell during the sales process so that customers can mitigate the emissions related with their purchase.

What are the economic consequences?

Increases are expected in the frequency and intensity of weather and climatic hazards. There are likely to be other changes such as ecosystem degradation, and reduced availability of water and food, especially in poorer developing countries. Uncertainty prevails over estimating the cost of climate change:

The EU estimates that the cost of tackling climate change would cost €100 billion (US$142.9 billion) per year globally by 2020 but failed to suggest how the 27 countries would share the bill and what Europe's contribution would be toward the overall spending;

A report by the European Policy Centre suggests climate change could cost developing economies up to 12.0% of GDP and advanced economies up to 19.0% of GDP by 2030;

The UN Framework Convention for Climate Change (UNFCCC) suggested the climate cost by 2030 from 2007 could be between US$70.0 to US$100 billion annually, of which more than 50.0% would be needed in developing countries. This may be underestimated.

Many analysts suggest that the cost largely depends on different forecasts of GHG emissions and the timeline for reaching them. Any delay on emissions mitigation is likely to result in an increase in climate change costs.

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