Our Grasp Falls Short

A longstanding conflict within the sustainability movement has pitted what passes for conservatism in modern discourse and what has traditionally constituted conservatism -- adventurist neo-liberal catering to entrenched economic powers versus stewardship of community values dating back thousands of years.  Each camp can present compelling logic although, as in the upcoming UN Climate Summit, they more often talk past than to one another.  Corporations and communitarians each presume that their respective value system is the only one capable of addressing the crisis and, not surprisingly, each puts forth an image of the crisis that plays into its own value system.  One of the challenges inherent in promoting understanding of sustainability on a college campus is finding ways to talk to both sides such that the message communicated is consistent even if the vocabulary, metaphors and value priorities used are anything but.  With luck, a new report from international accounting firm PricewaterhouseCoopers will help decrease the conceptual gap.

Based on the most recent century and a half (+/-), most business folk tacitly understand that economic growth and fossil fuel consumption are closely tied.  They may acknowledge the existence of unintended consequences such as climate change, but in their hearts they believe that without sufficient economic growth we'll never be able to pay for any infrastructure changes required -- the common assumption is that we need to grow as much as we can right now so that we'll have enough money to pay the bill for global warming (be it to reduce or to survive the effects) when the issue can no longer be deferred.  Not surprisingly, the outliers within the corporate community have included firms involved in creating and delivering "green" technologies, insurance companies (particularly property/casualty insurance companies) and risk accountants.  It's in this last role that PwC has issued a series of "Low Carbon Economy Index" reports.

What the LCEI really does is to address business risk under the assumption that the IPCC doesn't consist totally of idiots.  Or, if you prefer, it presents information from the IPCC's continuing Climate Assessment process in terms that business managers are likely to find actionable.  As a result, it speaks not of reducing greenhouse gas emissions per se, but of reducing the "carbon intensity" of economic activity -- pounds of GHG per dollar of GDP.  The presentation is one that folks on the communitarian side (full disclosure -- myself included) find somewhat troubling, but the intensity reductions being discussed are sufficiently severe that total emissions approach zero by the end of the century, an outcome even an environmental purist can only love.

To business managers, the report points out the risks that climate change will present to supply chains that are increasingly long and complex; to consumer markets which will be increasingly disrupted; to physical capital which will be increasingly endangered around the globe; and to corporate structures of foreign affiliates, subsidiaries, contractors, and suppliers which have been designed to be optimal under a fixed (but likely to become highly variable) set of social, political and physical constraints.

What PwC's presentation highlights is that, at least since 2009 (their first report), businesses and governments worldwide have committed to carbon reduction at lower levels than any degree of climate stability would require, and have accomplished carbon reduction at lower levels than they committed to.  For example, at the start of 2013, the world needed to reduce carbon intensity by 6% each year through the end of the century in order to limit temperature increase to two degrees Celsius.  What we actually accomplished was a 1.2% decrease worldwide (and that was a greater reduction than in previous years).  Thus, what we needed as of the start of 2014 rose to an annual reduction of 6.2%.  Those are terms (prior underperformance leading to increasing burden in out years) that any business manager can understand.

The bad news is that if we as a planetary society continue at the average (2009-2013) annual decrease of 0.9%, we will irrevocably and unalterably destroy any hope of a habitable year 2100 within 20 years from now.  The good news is that, for the first time since PwC started calculating its index, emerging countries reduced their carbon intensity more rapidly than G7 "developed" economies did.  While US emissions per dollar of GDP stayed effectively flat, China's emissions per yuan decreased by 4%.  That's not as high as the 6% reduction required, but at least it's in the right ballpark.

One interesting case is the real-life experiment that Australia is currently running.  At a 7.2% carbon intensity reduction in 2013, Australia led all countries tallied.  There were some atypical factors in play (unusually heavy rains leading to higher-than-average hydropower generation, for instance), but if nothing else the recent Australian experience shows that, primarily by means of promoting renewable electrical generation and imposing a carbon tax, meaningful -- indeed, sufficient -- reductions can realistically be achieved.  A continuing experiment, though, is created by the fact that Australia's Parliament has now repealed the carbon tax; the world is watching to see the effect of this repeal.

If investment is the act of spending capital in the hope and expectation of increasing future economic activity, then appropriate expenditure to decrease risks presented by climate change (primarily, by reducing the magnitude of climate change itself) appears to be an attractive investment in the long term.  But we've got to get serious about our investment portfolio.  Starting now.