Addressing risk in climate finance solutions.

• Author: Eckhart, Michael
• Position: Essay

Despite the resurgence of nationalism and anti-globalization, the world will forge ahead in financing climate solutions. Three reasons for this stand out. First, the current political movement toward nationalism is in the realm of politics, not in technology, economics, or finance. Second, there is massive and global momentum in clean energy technologies and other climate solutions that is not going away. And third, the world has the capital resources to do the job and understands the next steps that need to be taken.

The world is lurching forward, in fits and starts, with solutions to global warming, climate change, and sustainability. The adoption of the Paris Agreement in December 2015 appeared to establish a new and clear path. However, just a year later, it seemed that new challenges were arising from a resurgence of nationalism and anti-globalization, as reflected in the Brexit resolution in the United Kingdom and the election of Donald Trump as president of the United States on a platform of environmental rollback under the banner of America First.

However, this article supports the view that we are not slipping backward and will forge ahead toward the financing of climate solutions for three reasons:

1. The current political movement toward nationalism is in the realm of politics, and not in the reality of technology, economics, industry, markets, and finance--the factors that have overtaken pure politics as the drivers behind recent progress;

2. A massive and global momentum has built up over the past 70 years with clean energy technologies and other climate solutions that are not going away, supported by global policy commitments in over 150 countries that cannot be readily reversed;

3. The world has the capital resources to do the job and understands what next steps will need to be taken to create a pathway to success.

   The year 2015 might be seen in history as the culmination of 70 years of efforts since World War II to establish greater regionalization and globalization on many matters including but not limited to defense, trade, immigration, science, environment, and finance, and the formalization of greater cooperation among countries of the world in the form of agreements such as the Paris Agreement.

   THE PARIS AGREEMENT

   The Paris Agreement is an agreement within the United Nations Framework Convention on Climate Change (UNFCCC) dealing with greenhouse gas emissions through mitigation and adaptation, starting in the year 2020. Representatives of 195 countries negotiated the agreement in the run-up to, and at, the twenty-first Conference of the Parties (COP 21) of the UNFCCC in Paris and adopted the agreement by consensus on 12 December 2015. The agreement was opened for signature on 22 April 2016 (Earth Day) at a ceremony in New York City.

   As of April 2016, 194 UNFCCC member countries have signed the agreement, of which 143 have ratified. The agreement went into effect on 4 November 2016, just prior to the opening of COP 22 in Marrakech, Morocco. The agreement calls for nationally determined action plans, but also requires a report on progress every five years as part of a global cooperation agreement on reaching climate change goals.

   BREXIT AND TRANS-PACIFIC PARTNERSHIP

   Then, on the heels of this global success have come reversals of similar endeavors, such as the Brexit resolution against UK membership in the European Union and the Trump administration's withdrawal of U.S. participation in the Trans-Pacific Partnership (TPP).

   The Brexit vote was reportedly about British citizens' sense of lost sovereignty, and in particular a loss of control over immigration. The EU's immigration policy is a supranational set of rules that have come under fire due to the surge of refugees coming principally from war-torn areas of the Middle East and North Africa.

   Since 1999, the EU has been developing a common immigration policy for Europe. (1) EU countries have agreed that the union should have common immigration and visa rules that will be valid across all 27 EU countries. These are set out in the Treaty on the Functioning of the European Union of 2009 and include common rules on entry and residence conditions for migrants, procedures for issuing long-term visas and residence permits, the rights of migrants living legally in an EU country, measures tackling irregular immigration and unauthorized residence, and incentives and support for EU countries to promote the integration of migrants.

   The Brexit resolution is said to have passed because of populist objection to these EU-imposed immigration rules that led to a swell of immigrants from Syria and other terrorist-prone, war-torn areas into the UK. The British were saying, in effect, "Britain First."

   The TPP took more than ten years of talks to take shape. The agreement would have set new terms for trade and business investment among the United States and 11 other Pacific Rim nations--a far-flung group with an annual gross domestic product (GDP) of nearly $28 trillion that represents roughly 40 percent of global GDP and one-third of world trade. (2) However, the Trump administration has withdrawn from the pact, citing America First.

   The politics of international cooperation seem to face the prospect of a 180-degree turn, and this rightfully raises the question of whether the Paris Agreement will be honored in full, in part, or dissolved.

   The thesis of this article is that the Paris Agreement will be honored in full and implemented for the following three reasons:

1. The technologies exist and are continuing to emerge to substantially reduce and eventually end the consumption of fossil fuels with the attendant carbon dioxide, methane, and other greenhouse gas emissions;

2. Policy mechanisms and market forces that are proven to work are already in place in more than 150 countries to enable the shift; (3)

3. Sufficient capital resources are ready to be deployed if new risk-mitigating mechanisms can be put in place.

   TECHNOLOGY

   The world is 70 years into a 100-year transition to a cleaner energy economy, to be...