Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.
Seth Collins, Oxford MBA Candidate 2016-17 at the Saïd Business School gives his perspective on the Skoll World Forum session “Carbon Imperialism or Energy Leapfrogging”.
How to balance the ethics and the economics of energy development?
The opportunity is clear for developing countries to forge their own energy infrastructure path, and the question, then, is whether or not they will be empowered to do so with the support of international capital markets.
You see, the banks were not at COP21. In the plenary, we spoke of capitalism’s amorality, and the need to build the playing field to guide the system; currently, argued the panelists “imperialism” hides behind the notion of risk. The risk of funding a energy infrastructure project in a developing country—something everyone agreed was an easy cash flow win if done right—is the risk of a pension fund trusting an institution in a developing country. The fear is that the opportunity is not being realised from the perception, but not the existence, of risk, leading to the paralysis of passive money instead of productive capital.
Of the $300 billion spent last year on clean technology infrastructure, only $22 billion went to developing countries. If we really want to meet the energy needs of developing countries and mitigate climate change with an aim to stay below 2 degrees, that $22 billion need to ratchet up to $500 billion, a multiple of 25x.
This requires transformational solutions. At Skoll, we heard World Bank President Jim Kim refer to the Development Finance Institution industry as a “cottage industry” as he explained how the Bank is working to change its internal incentive structure. He spoke of how to leverage money through the Bank at a 5x rate. While a useful vehicle to enable progress, that 5x multiple comes with the bureaucracy that prevents Kim, a trained doctor, from talking about coal, even though overwhelming evidence now shows that coal should not have a future in the 21st century—in climate, we have already built enough coal power plants that, if they run for their lifetime, will alone put us beyond the ambition of 1.5 degrees; in health, we know that the local costs to health alone from the pollution of a coal power plant are triple its economic benefits over 10 years; economically, renewables are now cost competitive in technology-agnostic auctions across the world and will continue to push coal into the uneconomic realms of generation merit order; and, as we see increased variability in heat waves and droughts, coal power plants will shut down under heat duress and compete with local communities for water access. 5x with bureaucracy is not the 25x we need.
We heard Citi’s Global Head of Environmental Finance and Sustainability outline how the underlying purpose of the two dominant incentives for clean energy infrastructure developed in the US (PURPA) and Germany (FiTs) was to provide a proxy long-term off-taker guarantee, and that to see the take off of energy infrastructure supported by capital markets will require a similar mechanism moving forward. This is the inspired market thinking we need to compliment the socio-political pressure promoting 21st century energy infrastructure jobs.
While calling the banks a cadre of imperialists uninspired to invest in productive change may ring normatively true, it is up to leaders to build the rules, frameworks, and enabling environments through which to pull the uninspired from the passive cubicles of the Street or the City to build the inspiration of billions to have the capabilities to build lives powered by cheap, distributed, and clean electricity.
Neil Yeoh completed his Oxford MBA in 2016 and now works at Echoing Green as a Portfolio Manager to their Climate Change Fellows. He is an advocate for climate change and was recently awarded the title of World Economic Forum Global Shaper at the NYC Hub.
‘There is the natural tendency that all of us are vulnerable to, to deny unpleasant realities and to look for any excuse to push them away and resolve to think about them another day long in the future’ – Al Gore on climate change.
This statement is true in my life. At the age of 16 as an Australian-born Asian I travelled to Xi’an China in search of my ethnic and cultural identity. Instead I found the thick dark smog that covers and chokes a lot of east China today. At the time I selfishly assured myself that Australia far away from air pollution was home, but in time realised that the world air pollution impacts our shared home. I denied the problem for many years but eventually acted knowing the type of ancestor I wanted to be – one who fought the good fight in tackling air pollution and, more prominently, climate change for our future generations.
So when I got the opportunity to attend the UN General Assembly’s action event on climate change and the Sustainable Development agenda on Thursday, 23r March 2017, I was eager to hear about the progress towards realising the 2016 UNFCCC Paris Climate Treaty, and how I could play a better part. Overall progress has been made, but not enough to ensure a less than 2oC rise in average global temperature to avoid the most serious impacts of global warming – where island nations are submerged, extreme weather becomes more frequent, and plants and animals risk extinction.
Here are three takeaways from the event we need to save our world from climate change:
Neil Yeoh attended the UN General Assembly Climate Change event on 23rd March 2017.
More money and smart investments
Solutions exist – but we need more money to invest into renewables. It’s no secret that renewable energies like solar and wind are now cost-competitive with conventional energy production, reaching prices as low as 3 cents per kWh in some markets. Global renewable investments grew almost 700 percent from 2004 to 2015 reaching a record USD 348 billion. It’s a start, but this is still less than half of the funds required to double the share of renewable energy (currently only ~18%) in total global energy consumption by 2030.
To get on track with the money we have, it’s critical that we make smart investments. The UNFCCC, which has USD 10 billion is working to structure current and future deals to scale the impact of renewables. According to Ambassador Howard Bamsey, Executive Director of the Green Climate Fund and custodian of the UNFCCC funds, mixing debt and equity helps to achieve healthy leverage rates, stretching existing money while also funding solutions that can scale impact beyond the money available.
More adaptation and localised solutions
We need adaptation solutions as much as mitigation solutions to climate change. Many scalable solutions are focused on restraining the production of greenhouse gases, but it’s important to also support solutions that help people and environments adapt to an imminent future where the damage is already done. Start-up Coral Vita embraces this approach, aiming to grow climate-resilient coral to sustain ocean ecosystems with rising temperatures and water acidification.
The most effective solutions will be designed to meet local country needs. When I spent time in rural Kenya with M-KOPA Solar, off-grid solar devices were combined with innovative financing to bypass the lack of infrastructure to achieve local electrification. In Finland, the Bank of Aland is issuing a green credit card to tackle climate change in the Baltic Sea, where customers opt in to measuring and offsetting carbon emissions from their financial transactions.
Helping yourself whilst helping others
Countries must abandon isolated mindsets when it comes to battling climate change. Mr Xie Ji, Director General of NDRC’s Department of Climate Change took off his “climate negotiator hat” and reasoned that China needs to look outwards to provide capacity and technical support to neighbouring countries to help them build renewable capacity.
I agree with this philosophy as we cannot expect to reach climate targets at the rate we need without supporting one another through collaboration and shared technologies. To picture this – it’s like the oxygen masks on aircraft safety videos. The instruction to install your mask and masks of your children is applicable in addressing climate change since we are all effectively travelling on the same plane, or in our case, world. We’re all in it together, so if it begins to nosedive we might as have helped each other out in case we make it out alive!
So what can we do?
As custodians of the world today we need to lead by example with our wallets (buying into renewables and green solutions); our minds (enterprising new and scaling existing solutions); and our hearts (working on efforts as a community). Maybe then we’ll have a world our future generations can enjoy, as much as we do today.
Oxford’s Fierce Compassion – Series of Student Insights to the Skoll World Forum 2016.
MBA student Neil Yeoh gives his perspective on the Skoll World Forum seminar session ‘Post-Paris: A New Era in Global Sustainability?’.
It has been just over five months since 195 nations signed the UN Paris Climate Change Treaty – a pivotal step towards global sustainability. However, doctor as every month passes and the champagne stops flowing, people scratch their heads as they consider “the real issue – how do we get there?” – framed by Mindy Lubber, President of Ceres.
A panel made up of the most distinguished climate leaders of today including former president of Ireland and UN High Commissioner for Human Rights – Mary Robinson – discussed this very issue. And amongst the dialogue, five overarching themes emerged:
Changing the conversation – a bigger mindset shift is needed
Pushing for policy change – the world will not self-correct
Enabling access to finance and technology – developing countries cannot do it on their own
Inspiring a larger movement – communities can achieve change
Managing industry change – the transition from dirty to clean will be challenging
Far from the detailed implementation plan everyone was hoping for, the audience may have left dissatisfied still debating how we will get there. However, these feelings and thoughts reveal the true complexity of the challenge that lies ahead to make the treaty a reality. Climate change touches countless nodes of the world’s ecosystem and will need unprecedented global coordination and cooperation to alter course.
But I believe there is hope! If the world’s leaders were able to find common ground on the urgency of global sustainability, the rest of humanity – activists to sceptics – will surely find common ground in the fact that climate change is a real threat to our children and grandchildren. I, as I’m sure many others, can relate to and be compelled to act on that.
From left to right: Dipender Saluja – Managing Director, Capricorn Investment Group (Moderator); Mary Robinson – President, Mary Robinson Foundation – Climate Justice; Thom Woodroofe – Climate Policy and Communications Advisor, Independent Diplomat; Mindy Lubber – President, Ceres; and David Blood – Senior Partner, Generation Investment Management.