It was all about the climate this week. At three big climate conferences around the world, there was a tension missing from previous events. The climate is changing fast, and societies, economies and corporations can forget about business as usual. The issue no longer has shades of grey – it’s all fire-engine red.
In Madrid, the United Nations held a carbon-markets negotiating session at a site the size of a major airport. At the same time in Brussels, European Union leaders were bashing out a highly ambitious agreement to commit the world’s largest trading bloc to carbon-neutrality by 2050. And in California, the annual convention of the American Geophysical Union, the world’s largest collection of Earth and space scientists, was presented with more troubling evidence that extreme weather events are not just freaks of nature; humanity’s paw prints are all over them.
Even Canada is buying into the narrative. A perennial carbon-reduction laggard – it has blown through every target it has set – Ottawa now plans to meet or exceed its 2030 reduction targets and is promising “net-zero” emissions by 2050. In Madrid, Jonathan Wilkinson, the new Minister of Environment and Climate Change, acknowledged that we’re in a “climate crisis.” If any environment minister had used those words during the oil sands-worshipping Stephen Harper era, he or she would have been busted down to minister of corner stores.
By the end of the week, the outlines of a new era of trying to prevent global warming from exceeding 1.5 degrees over preindustrial levels was coming into shape, and the implications for economies everywhere will be profound – to the point of hints of central planning on a massive scale.
On Friday afternoon, as the Madrid conference was winding down, talks on the crucial Article 6 of the 2015 Paris Agreement were going into overtime, although there was no guarantee of consensus because the usual suspects – the United States, Australia, Brazil – were said to be engaging in blocking tactics. The article was the focus of the UN’s so-called COP25 conference. It would put a price on carbon and create a market, allowing low-emission countries to sell their credits to high-emission countries such as Canada.
The EU’s Green Deal is still a work in progress, but its shape was also coming into focus. By Friday, Charles Michel, president of the European Council (comprising the heads of state of the 28 EU members – 27 after Brexit), essentially declared victory. “Carbon-neutrality is our common goal,” he told the media.
Reaching that goal will cost a fortune – an estimated €290-billion a year over the next three decades. Poland is supporting the Green Deal but is opting out of the net-zero target by 2050 because coal generates 80 per cent of its electricity. It is pleading for financial help to decommission the coal plants and build cleaner alternatives. Other coal-dependent countries will go begging, too.
The implications of the institutional and legal momentum behind the creation of a carbon-neutral economy in little more than a generation are hard to overstate, all the more so since hydrocarbon production continues to rise as populations grow and developing countries move up the wealth ladder – they too want cars, air conditioners and airline tickets.
The Western world’s businesses, from oil companies and airlines to automakers and steel mills, will have to make profound changes to comply with net-zero demands and laws.
The problem is uncertainty, and businesses hate uncertainty. They might join the global shift to carbon-neutrality and draft carbon-reduction business plans in decade-long chunks – only to find political events or social upheaval wrecking their plans.
Take Brexit. The EU’s Green Deal was conceived years ago, before Britain invented that portmanteau. Prime Minister Boris Johnson won Thursday’s election by a landslide and is taking Britain, a big contributor to the EU budget, out of the union next month. The country’s absence will only make the EU’s decarbonization efforts more difficult.
Or Ontario. One of Doug Ford’s first acts as Premier was to yank the province from the cap-and-trade market it operated with Quebec and California. The market was working, and there were few complaints. Large emitters in Ontario had built the purchase and sale of emission allowances into their budgets. Still, out of the blue, Mr. Ford killed it.
The social side carries enormous risks for companies, too. To put businesses on the path to carbon-neutrality, bosses will demand sacrifices from their employees as strategic plans are overhauled and new costs arise. At first, employees may buy into the plans for the sake of the planet. But how long will their common drive and patience last? What if Canadian workers make sacrifices only to see jobs migrate south? (Donald Trump is pulling the United States out of the Paris Agreement.)
What is certain is that the world’s transition to a low-carbon economy is starting in earnest. Article 6 may not find approval this weekend, but it’s coming. The EU’s 2050 goal may not become enshrined policy this month, but it will soon. Canada almost certainly will not back down on its 2050 commitment. Companies have to start planning for the black-to-green transformation. Too bad most politicians are as variable as the weather.