"The trade-off between climate change and economic growth is fake": US, Saudi Arabia, investors and economists back clean energy future

Clare Saxon Ghauri
Reading time: 6 minutes
21 May 2015

PARIS: Saudi Arabia is aiming to be a global solar and wind energy leader and low carbon growth is a "personal priority" for the US, according to senior government representatives who spoke at the Business & Climate Summit during Climate Week Paris today, where finance and energy sector leaders from around the world expressed their readiness to shore finances toward a clean economy as well as their faith in a global climate deal.

Giving an overview of how the financial sector is reacting to the stranded assets of ‘unburnable’ carbon, Philippe Desfossés, CEO of French Public Service Additional Pension Scheme ERAFP and Chairman of IIGCC – which is collectively responsible for the management of assets worth US$11 trillion – warned “it's time to allocate funds that reduce exposure” to carbon risk.

To speed up this low carbon economy transition, the CEO recommended harnessing the power of the market. Referencing President Hollande’s speech on the same stage yesterday, he said "we need to put a price on the negative externality that is carbon", and demanded governments “stop changing the rules to the game when the game has already started" when it comes to climate policy.

Also recommending ways to accelerate the clean energy shift, Ian Simm, CEO of Impax Asset Management Group said greater data disclosure and innovation around finance mechanisms is needed, but that really "disrupting the system" requires much longer-term thinking – an important point that was brought up at a separate climate finance event at Climate Week Paris.


However, Ian Simm said he is “worried” that the crucial issue of climate finance could be regulated to "what could be seen as side show", when actually around US$90 trillion of related infrastructure investment is expected within the next 15 years. He cautioned: "What we need is climate change aware finance across the board, not a climate finance side pocket.”

One world-leading financial institute that knows the value of mainstreaming climate funds is Bank of America. The Bank's Chariman Purna R Saggurti, reminded the audience of its US$70 billion designated to support investment in the space, of which US$39 billion has already been spent - as well as an extra US$1 billion announced last September that will stimulate at least another US$10 billion of new investment into clean energy projects.

These numbers will only increase with time as the markets adjust according to Assaad W Razzouk CEO of renewables company Sindicatum, who likened fossil fuels and renewable energy to the horse and cart and subsequent revolutionary transition to motorized cars hundreds of years ago.

The CEO pointed out that none of the car manufacturers we know today evolved directly from horse and carts - despite cycles where oil was expensive such as during the Great Depression when the declining industry surged briefly - because they didn’t adapt and so eventually disappeared. However, he warned we should not quite compare fossil and clean energy asset figures, as carbon risk externalities are not yet taken into account, but once they are the low carbon movement "will rapidly accelerate".


World-renowned economist Professor Lord Nicholas Stern kicked off the second panel declaring: “We are at the beginning of arguably one of the most important 20 years in world history.”

Outlining how we are “on the margins” of staying within the 2 degrees Celsius temperature rise we need for a safe climate, the economics expert said if we move quickly enough, we will not only reduce emissions but also “lay the foundations” for the future energy systems and infrastructure we require to prepare for the 6.5 billion people - 70% of the global population we expect by 2050 – who will soon live in cities.

But, if we “muck about with half-baked policies” the Professor warned we will miss the “tremendous opportunity” for a clean technology revolution, urging the audience to read the New Climate Economy's Better Growth, Better Climate report, which has just been published in French.

One country that is not an obvious front-runner in this new low carbon economy is Saudi Arabia, which has the second largest oil reserves in the world. However, the region’s oil makets will eventually decline and be replaced by its fast-developing solar energy industry, according to Saudi Arabia Oil Ministry’s Ali Al Naimi, who hopes the country will be “exporting gigawatts of electric power” instead of fossil fuels “in the next five years”.

The Minister said energy efficiency, carbon capture and storage, and clean technology are a now a priority for Saudi Arabia, which is investing in renewables “for the medium and longer term”. He added: “We are reinvesting time, money and man power to become a global player in solar and wind energy”.

Agreeing with the Oil Minister’s call for “reliable, affordable, climate-friendly energy for all” to cater for the 1 billion people in the world without reliable access to energy, Francesco Starace, CEO, Enel Group said low carbon energy access should indeed be an international effort. He underscored the opportunity that exists for rich and poor countries to work together: "One half of the world needs energy, the other half has a tech revolution that has answers.”


Importantly, there is no better time to act on the clean energy transition “than now”, says Andrew O’Brien, the Special Representative for Global Partnerships, US Secretary’s Office of Global Partnerships. He promised that US President Obama is committed to addressing climate change at home and abroad, stating that the President’s approach to COP21 is simple: a global climate deal must be successful and “lay the groundwork” for the next 10-30 years.

America’s INDC submission of an emissions reduction of 26-28% below 2005 levels by 2025 is accepted as ambitious by many in the climate sector and Andrew O’Brien urged other countries to join the US in its bold target.

Quoting Secretary of State John Kerry who Andrew O'Brien said takes the climate challenge “very personally” - and who spoke in a video message shortly after the panel in a separate session – the US representative declared: “The solution is not a mystery, it is staring us in the face. Energy policy. Energy policy is the solution to climate change. With the right choices at the right speed, you can actually prevent the worst effects of climate change from crippling us forever. If we make the switch to a global clean energy economy a priority, if we think more creatively about how we power our cars, heat our homes, operate our businesses, then we still have time to prevent the worst consequences of climate change. It really is as simple as that."

In response, Jean-Bernard Levy, CEO of EDF said he is “happy to hear about energy policy” but that it should also include technology and finance. Bringing the conversation back to clean energy investment he said: “EDF is live demonstration of what a significant power company can be; very low carbon emissions, hardly any thanks to major choices made several years ago, with the right mix of nuclear power and renewable energies. We are champions as a low carbon example.”


Nicholas Stern summed up all of the other panellists, agreeing there is a strong need for a range of new technologies and infrastructure as well as extreme urgency required to get there, but steered the discussion to politics and the upcoming global climate negotiations toward the end of the session: “The alleged trade-off between climate change and economic growth is fake. An artificial horse race. The big issue is political will”, he said. “That deep commitment from John Kerry is there; that commitment has to spread around the world. We are seeing it change in China and other places, but not yet fast enough.”

A show of hands revealed belief we will reach agreement in Paris, but as Nicholas Stern warned: “Intentions from Paris should be seen as a floor from which to move as quickly as possible to ramp up ambition”. He recommended that climate finance and clean technology be built into the system and agreement, saying optimistically: “If the intention for acceleration after Paris is there, it will be a success.”

Mentioning German Chancellor Angela Merkel and French President Hollande's meeting two days ago in Petersburg who agreed a long term goal is critical for meeting the 2 degree target as well as building confidence for low carbon investment, Nicholas Stern concluded: “We require a long term goal to decarbonize the world economy to zero by the end of the century”. He added: “It isn’t a pipe dream, but a story of stronger, cleaner growth.”

The Business & Climate Summit is the principle event of Climate Week Paris which ends on May 24 and features more than 25 events across the city, including Climate Finance Day on May 22.


By Clare Saxon Ghauri

Climate Week Paris, which is convened by The Climate Group, takes place from May 18-24, 2015. See the full calendar of events by visiting ClimateWeekParis.org

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