Eric Gay/AP Photo
A man wears a face mask as he fishes near docked oil drilling platforms, May 8, 2020, in Port Aransas, Texas, on the Gulf of Mexico.
The COP26 climate conference in Glasgow made real progress, but it didn’t go far enough. Wait, what? The reality is closer to the opposite of that ubiquitous takeaway. Rather than nudging forward the vanguard of climate action, with pragmatic allowances that some actors might fall short, the U.N. talks were largely a lagging indicator of opinions already reached by elites.
“Positive real world trends have prepared the way for a political breakthrough,” reads one especially celebratory postmortem by E3G, a European think tank closely involved with the negotiations.
That tail-wags-the-dog logic is right. Political developments at U.N. climate talks have followed on ad hoc real-world progress, formalizing existing advancements.
While the climate conference produced little new substance, then, it does provide a convenient opportunity to take stock of elite consensus.
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OIL AND GAS are not mentioned in the final deal text.
Instead, coal was the late-stage sticking point at the conference. As nearly every media report has underscored, China and India insisted at the last minute on weakening the coal language from “phase out” to “phase down.”
True enough: The Asian giants are towering obstacles to coming off coal, since the dirtiest fossil fuel is a key ingredient in their growth plans. Even as both countries deploy more renewables, they expect to keep putting everything but the kitchen sink into their energy mix.
The United States and EU come off looking relatively good by contrast. Americans last year notched their lowest annual coal consumption since 1965. That pandemic-induced drop is not conclusive. The global power crunch has driven a spike in coal use and prices, opaque private investors and smaller players will continue snatching up facilities, and Joe Manchin is pushing for carbon capture subsidies that could extend the life of money-losing coal plants. Also, there is the awkward snag of the recent German coal boom. Still, momentum is with winding down coal use in the industrialized world. (Little thanks to the Paris Agreement, which made no reference to the fuel.)
Less discussed are the conditions that have enabled coal’s (protracted) demise. The billionaire Michael Bloomberg’s “Beyond Coal” campaign, working with the Sierra Club, retired two-thirds of America’s coal plants in under a decade, and has sped the shutdown of overseas plants. Elite-led coal retirement in developed countries has been tolerated amid an oil and gas boom that shows no sign of abating.
Obama kicked off the transition from coal by switching not to renewables but to natural gas, a trend that continued under Trump. The physical and political infrastructure that sprang up around that boom—pipelines, gas plants, petrochemical industries like the fertilizer and plastics that turbocharged the conservative Koch brothers—are all now entrenched players.
Today, the United States is the world’s largest oil and gas producer, a spot it intends to keep. The country is set to increase oil and gas production to 17 and 12 percent above 2019 levels, respectively, by 2030, according to projections from the U.S. Energy Information Administration. Those increases would flow largely to exports. Just this week, Biden announced an 80-acre sell-off of crude oil in the Gulf of Mexico. He has lately framed any oil and gas phaseout as punishing working-class families with higher energy prices.
Meanwhile, the EU is deciding whether to include natural gas in its taxonomy of green investments, making gas-fired power stations more attractive. Europe is also weighing carbon taxation schemes that some observers fear could fall regressively on working-class commuters.
The heavy emphasis on China and India as spoilers on coal talks conveniently redirects attention away from the tacit agreement to more U.S.-led expansion in oil and gas. That isn’t just a bad deal for developing countries. It could also crash up against initiatives to phase out domestic consumption of fossil fuels without investing in alternatives, leaving working classes in the developed world to shoulder the cost.
A $100 BILLION climate finance commitment originally made in 2009 was also played up by newsmakers as a key theater of COP26.
Rich countries pledged over a decade ago to mobilize $100 billion in annual financing, to help developing countries adapt to climate change. Since then, they have fallen short each year, something media coverage has emphasized as an example of the developed world’s indifference to the climate crisis.
“Frankly, I think it’s a distraction,” Justin Guay, director of global climate strategy at the Sunrise Project, told the Prospect. “If you’re trying to solve for the politics of international negotiations, then the $100 billion matters. If you’re trying to solve for unlocking the investment needed to drive a clean-energy transition, it is an utter waste of time.”
That inadequacy has less to do with the size of the pledge, and more to do with how it sits on top of the global financial system. Although renewable energy is becoming cheaper and more profitable to build, Western creditors are skittish about investing in emerging markets, where perceived risk drives up the cost of capital and keeps infrastructure projects prohibitively expensive.
Taking note of the opportunity, asset managers are asking rich governments to hold their hand. BlackRock CEO Larry Fink has led the push to de-risk investment in emerging markets, proposing that developed countries induce firms to invest by agreeing to take the “first loss” on deals that go badly. He would also have rich countries make direct grants to mitigate risks in emerging markets “related to political stability, legal enforcement, reputational concerns and macroeconomic management.”
It’s not a new argument. For the last several years, leveraging private capital has been the organizing mantra for multilateral development banks. The World Bank’s “billions to trillions” agenda aims to squeeze more growth out of each public dollar by blending it with private financing. So far, that agenda has not delivered. One dollar of public investment has mobilized just 37 cents in low-income countries, research by the Overseas Development Institute found.
Now, however, a private sector–led international climate finance strategy has found prominent backing in the Biden administration.
John Kerry, the U.S. climate envoy, told businesspeople at the Confederation of British Industry that “no government in the world has enough money to effect this transition.” Asset managers have put up $130 trillion so far because they see profit opportunities, he said. “That’s not giveaway money, that’s not concessionary. That is investment money.”
Treasury Secretary Janet Yellen last month urged the IMF and World Bank to work closely together “when designing health and climate policy conditionality,” and stressed their role “creating an enabling environment for climate-friendly finance.”
Critics see structural adjustment programs repackaged in green. They worry an energy transition directed by Wall Street would socialize the risks and privatize the profits of the transition. Others say that absent tight regulation, governments could fork over subsidies to developers without sparking the promised boom in green investment. Still others retort that bickering over public or private funding sources is irrelevant, given that the needed investment is economy-wide.
The conference’s main answer to the climate finance problem is Glasgow Financial Alliance for Net Zero, a coalition of banks, insurers, pension funds, and asset managers. The bar is painfully low. For example, guidelines for banks only mandate green targets for direct investment and lending. Underwriting, the primary way banks finance fossil fuel investments, is excluded.
For its part, BlackRock is bullish on the outlook for international climate finance. Ahead of the conference, the firm announced that it has raised $673 million for a new emerging markets climate infrastructure fund.
In view of the overwhelming emphasis on private sector–led investment, even skeptics appear to be pivoting toward reforming rather than fighting that consensus.
“We should take the hint,” the economic historian Adam Tooze, an influential commentator on green financing, reflected following the conference. “There isn’t going to be a big green Marshall plan.”
If Tooze is right, the consensus crystalizing around a market-led energy transition is ironic in view of Biden’s revival of industrial policy at home. Joe Thwaites, a researcher on sustainable finance at the World Resources Institute, told the Prospect that the United States’ agenda for international finance contrasts starkly with the domestic mandate, which has broken with decades of economic policymaking to focus on direct public investment. Internationally, by contrast, the administration has attempted to subsidize infrastructure with a “very much a carrot-based approach.”
SOCIAL JUSTICE language has also penetrated the U.N. climate talks, sort of.
It shows up most visibly in repeated reference to “communities.” The text recognizes “the important role of indigenous peoples, local communities and civil society … in addressing and responding to climate change.”
The need to affirm that ordinary groups of people—not just international blocs—will play a role in addressing the climate crisis could only come from the diplomacy-pilled brains who convene at COP. But the talk of local communities also conceals a practical insight: Absent binding enforcement mechanisms, nonstate actors really matter. COP26 extends the logic of right, left and liberal American political funders: Cities and statehouses are key battlegrounds.
The final text also notes the importance of protecting “biodiversity, recognized by some cultures as Mother Earth, and also noting the importance for some of the concept of ‘climate justice.’”
Maybe gritted-teeth acknowledgment of indigenous people and justice is progress, of a kind. But in American media, backlash to this emphasis is already visible. Tucker Carlson jokes that climate change is “systemic racism in the sky.” A coalition of gas-exporting countries complained at COP26 of “cancel culture on hydrocarbons.”
Anglo business journals have led a subtler pushback. They affect buttoned-up prudence, urging Western countries to hold off venal and opportunistic poor countries. India and China are “united by a sense of historical injustice,” explains The Economist. “Indians, especially, feel hard done by,” which leaves them “clinging to coal.”
The Wall Street Journal has leaned hard on the suggestion that developing countries are holding climate hostage in order to fleece rich countries. A recent article on the “cost of buying cooperation” from poor countries quotes a climate negotiator for Bangladesh explaining, “Sometimes I argue it’s not worth pursuing some little amount of money, because the energy, time and resources for developing a proposal are not worth it.”
The conservative line on development has long protested that rich nations are being stiffed by poor ones. Meanwhile, Goldman Sachs predicts that the spending spree on climate-resilient infrastructure in Latin America, Africa, and Asia could spark a global corporate capital expenditure boom to rival the 2000s. It’s not hard to see both stories sticking around side by side.
