Authored by Nicolas Delaunay, re-posted from Values Added
As the first global gathering after COP21 in Paris, the Abu Dhabi Sustainability Week was an interesting place to gauge the global temperature, so to speak, on the climate front: will we see a continued momentum or will the Paris agreement fade away in light of the current economic and geopolitical instability? I caught a few soundbites to find it out, within a plethora of panel discussions and side events between the World Future Energy Summit (WFES), International Water Summit (IWS) or IRENA’s General Assembly.
The beginning of the end of the ‘Fossil Fuels era’
With the COP21 heroes on stage – UN Secretary General Ban Ki-Moon, Christiana Figueres (UNFCCC Executive Director), Laurent Fabius (French Foreign Minister, COP21 President) or newly appointed Climate Champion Laurence Tubiana – one would have expected a full plate of triumphant declarations. This wasn’t to be. Well, perhaps just a tea spoon by Ban Ki-Moon “the Paris agreement is a triumph for people, the planet and multilaterism”when Laurent Fabius camouflaged his in subtle reverse psychology: “It would be tempting, despite the French reputation for modesty, to take all the credit. The truth is different: there was a political, economic & technical maturity around the issue”. Overall, a rather sobering mood dominated the week, focused on ways to “turn political ambition into practical action” as noted by Dr Sultan Al Jaber (UAE Minister of State and special envoy on Energy and Climate). Ban Ki-Moon quietly set the scene: “the shift away from fossil fuels must start immediately. Over the next 15 years, trillions of investments will be needed in infrastructures. These investments must go towards clean energy.”
Many of the interventions that followed, fed the sentiment that the green hammer used by Laurent Fabius to seal the Paris agreement, also sealed the fate of fossil fuels. A reality taking a particular significance in a region still highly dependent on them. “Paris signs the beginning of the end of the Fossil Fuels era, said Wael Hmaidan, International Director of the Climate Action Network. The first thing is to grasp the concept and understand it’s a reality. There is a window for fossil fuel use of 40 to 50 years [ie if we are to reach net zero emissions in time to slow down climate change way below the 2 degrees C increase as per the agreement]. This is a good opportunity for the Gulf region, given that the most cost-effective and accessible reserves come from it. The best way to fully decarbonize our energy system by mid-century is a 100% shift to renewables, something the region also needs to prepare for.”
Detailing what lies behind such a systemic shift sounded nearly as sobering: “Moving away from fossil fuels by 2050 practically means we need to accelerate our current rate of renewable energy installation by a factor of 55, assuming economic growth continues.” says Dr Sgouris Sgouridis, Associate Professor of the Masdar Institute. For the UAE – even as the first Gulf country to have initiated the diversification of its economy from oil – this raises broader ‘preparedness’ issues: “For the level of transformative change required by 2020 and onwards, it is critical that all levels of government, business and the public are well aware of the economic and social opportunities coming with climate action” pointed Tina Latif, Policy Advisor at the Directorate of Energy & Climate Change at UAE’s Ministry of Foreign Affairs. “A lot of work is needed on capacity building, developing the local knowledge and the institutional structures that will have the mandates” to drive this transition. Tanzeed Alam, Climate and Energy Director at EWS-WWF, agreed while also taking UAE officials at their word: “Dubai government mentioned 75% clean energy by 2050, 30% by 2030. We would like this translated as UAE’s renewable energy target and reflected in its updated INDC. Recent weather events such as the record high temperatures in Irak or Iran last summer, predicted to be more frequent, only show that climate change threats are very real for the Gulf region and could threaten the way our economies would function and generate value. This demands urgent national action and leading by example.” Calls like this to translate ‘words on paper’ into concrete policies were a strong leitmotiv of the week. “We heard: ‘we will celebrate the last barrel of oil’. Make it a reality!” insisted Wael Hmaidan.
Renewables: full throttle!
The FT/Irena Question Time Debate event at IRENA’s magnificent headquarters in Masdar City, gave a sense of how much Renewables were the hot ticket of the moment, looking at the sheer number of delegations in the room. An insider confirmed: “IRENA is the UN agency with the fastest expanding membership (168 countries members in 4 years)”. Another clue was the indefectible smile of IRENA’s Director General, Adnan Amin: “We are at an exceptional time for Renewables. We set a new record for Renewables investments but this is still not enough. In a new report we estimate that doubling the share of renewables by 2030 would provide half the CO2 emissions reductions needed, the other half coming from Energy Efficiency”. Let alone creating over 24 millions jobs and expanding global GDP by 1.1%.
High spirits on renewables would not even be curbed by the low price of fossil fuels: “There are four macro drivers that are here to stay” started Alex Thursby, group CEO of National Bank of Abu Dhabi (NBAD): “the energy gap between supply and demand, the commitment to decarbonize global economies, a desire of nations around the world to diversify their energy supply and accelerating investments in technology.” Add to it a financial community increasingly educated about renewables or low interest rates globally and, Alex Thursby predicted, ”the speed of renewables uptake will surprise everyone and low commodity prices will not prevent it.”
“We are ready to be competitive and make the transition [to renewables] cost free to the economy” said Jim Hughes, CEO of First Solar. “We can do this by relentlessly driving down costs through innovation.” If such confidence was to be expected by executives from the sector, a bold statement by the UAE Minister of Energy, His Excellency Suhail Al Mazrouei, made a strong impact: “I would like to see the UAE export renewable power to Europe, rather than fossil fuel.”
What about Finance? “Capital doesn’t flow on symbolism, it flows on tangible policies”
If the cost-competitiveness of renewables is getting second to none, the policy direction after Paris is crystal clear and interest rates are low, surely the trillions of $ required to finance the shift to a decarbonized economy will come to the table, right? Hang on… why have private investors not yet rushed to the party? Since Paris, speakers on the hot seat are no longer the usual ‘procrastinating’ policy makers but financers… Enter Kyung Ah-Park, Head of Environmental Markets Group at Goldman Sachs: “You need a trifecta ‘Capital, Technology & Policy’. There is ample capital that wants to make its way to renewable energy. Technology is definitely happening. What we need now is to align policies.” Kyung Ah-Park won a few hearts as she illustrated her point: ”there is still affirmative market distortion in the form of fossil fuels subsidies”. The fact Goldman Sachs is still affirmatively investing in fossil fuels was diplomatically left aside. But sitting on the same panel, Christiana Figueres gave her most forceful attempt at reassuring Kyung Ah-Park on the policy side. “The message from Paris is abundantly clear: we are moving away from Fossil Fuels and stepping our efforts to foster economic growth, decoupled from emissions. There are very clear and transparent milestones as well as the strongest of levers ensuring this will happen: each INDC was carefully crafted and researched to reflect countries’ own national interests!” It visibly takes more to faze the soft-spoken Kyung Ah-Park: “There is no doubt COP21 is an incredible milestone and Paris was high in symbolism. But capital doesn’t flow on symbolism, it flows on tangible policies. To give an example, the day after COP21, solar stocks rose by 3%. The day the US Congress announced an extension of solar investment tax credit to 5 years, they rose by 30%!”
Adnan Amin concurred: “Domestic policy is more important than anything else. There is lots of money in the system, especially with low interest rates. The question is which concrete measures can help mobilize more financing, reduce the cost of capital of renewables and their high perceived risk, how do we provide risk guarantees for investors?” Regardless of how fast investors will re-allocate capital towards renewables, many, including Dr Ahmad Belhoul, CEO of Masdar, think “we are now past the inflection point”. In this context, NBAD, which recently adhered to the Equator Principles perfectly timed its announcement of “committing $10bn to lending, financing and facilitating activities focused on finding new and environmentally sustainable solutions over 10 years.” Nathan Weatherstone, Head of its recently created Renewable Energy division explained: “our core clients are changing and more and more demand a stronger capability in sustainable finance. $48 trillion will be needed over the next 20 years for investment in energy infrastructures, this means huge opportunities for the banking sector, requiring all kinds of liquidity to come together to meet the funding. This is why we also encourage greater engagement between regulators, government, businesses and the financial community as it is incumbent on all parties to develop new procurement structures, new ways for doing business”.
In his Economic Review in 2007, Nicholas Stern labelled Climate change “the biggest market failure the world had ever seen”. Less than six weeks after a major step was accomplished in Paris, the Abu Dhabi Sustainability Week helped to remind us that the biggest failure that could undermine the fight against climate change would be the inability of all incumbents (business, government and the financial community) to align their actions towards“the only direction in which we can move” as Christiana Figueres put it: “highly decarbonized and resilient economies.”
There are no comments yet. Why not be the first to speak your mind.
About the AuthorTckTckTck is the online hub for the Global Call for Climate Action. The GCCA represents an unprecedented alliance of more than 400 nonprofit organizations from around the world. Our shared mission is to mobilize civil society and galvanize public support to ensure a safe climate future for people and nature, to promote the low-carbon transition of our economies, and to accelerate the adaptation efforts in communities already affected by climate change.
View Author Profile