Statement by Mathis Wackernagel, President, Global Footprint Network
The landmark U.S.-China climate change agreement announced this week is a game changer for our energy future because it represents strong recognition of the need to wind down fossil fuel use to zero within a few decades. What had been a physical necessity but a political taboo is now being acknowledged by the two countries with the largest CO2 emissions.
Other countries have been waiting on the sidelines for the United States and China to act on climate change. So President Barack Obama and President Xi Jinping’s commitment to reduce greenhouse gas emissions and boost renewable energy adoption by 2025 and 2030 respectively—just 10 and 15 years away—sends a promising signal to the world community on the path to the Paris climate summit at the end of next year.
The new goals would keep the United States on the trajectory to achieve deep economy-wide carbon emission reductions on the order of 80 percent by 2050, according to the White House. China, meanwhile, has targeted total energy consumption coming from zero-emission sources to around 20 percent by 2030. Both actions will happen well within the lifetimes of many people today.
These targets represent a significant shift in political momentum and suggest that moving out of fossil fuels may finally have won mainstream acceptance.
Of course, it will take significant investment for nations to transform their economies, and those costs are only likely to increase the longer nations delay in taking action. Consequently, it’s in the self-interest of every nation to act now to shift toward low-carbon policies as a way to “future proof” its economy.
Our analysis shows that countries are unequally exposed in terms of the scale and impact of reforms required to move to low-carbon economies. The longer countries wait, the more their carbon intensive assets will lose value in a low-carbon future. This inaction may lead both to a loss of competitiveness and potentially even a higher credit default risk. We are working with the U.N. Environment Programme Finance Initiative (UNEP FI) and leading finance institutions to develop tools for the finance industry to better measure these economic risks when evaluating sovereign bonds.
To succeed, government leaders at all levels need better tools to make economically effective long-term decisions on everything from infrastructure to energy provision to buildings. Consequently, we have worked with state leaders in the U.S. to enhance traditional net present value (NPV) tools that recognize the economic and resource context in which the investments will operate. Such assessments provide more realistic estimates of the future costs and benefits associated with particular investments and show that in many cases, the low-carbon options are already today the economically superior choice.
Indeed, the U.S.-China agreement announced Wednesday suggests we need an entirely new way to determine the value of fossil fuels and assets that could become stranded because of their overdependence on those fuels.
The details of how U.S. and China will achieve their ambitious goals remain to be seen, and the agreement may prove to be largely symbolic. But symbols can be powerful, and we believe the agreement portends a brighter outlook for action on climate change in 2015.