As the international community looks to the period beyond the UN Copenhagen agreements on climate change, attention is focusing on the finance for implementing global emissions reductions on the ground. The requirement for significantly scaled-up investment into the solutions to climate change is a central issue, often characterized as investment flows into 'low carbon technologies'.

This paper draws on five years of insights from mainstream financiers leading the exponential growth in renewable energy investment, and key issues for policy-makers seeking to foster conditions for even greater investment are identified.

This event is organized by Chatham House and the Center for Strategic and International Studies (CSIS).

Keynote speaker:

• Lindene Patton, Climate Product Officer, Zurich Financial Services

Other speaker highlights:

• Alexis Livanos, Northrop Grumman
• Sir David King, University of Oxford
• Barend Van Bergen, KPMG
• Mike Keebaugh,Raytheon
• Peter Stott, UK Met Office
• Trevor Maynard, Lloyd's
• Shree Khare, Risk Management Solutions
• Giovanni Rum, Group on Earth Observations
• Greg Withee, US National Oceanic and Atmospheric Administration
• Man Cheung, Marsh Ltd

Carbon capture and storage (CCS) has risen up the political agenda both nationally and internationally as a part of the effort to reduce CO2 emissions in power generation yet the applications, potential and impacts of this technology remain contested.

Is CCS - employed to produce low-carbon electricity and hydrogen - the panacea we urgently need to limit cumulative CO2 emissions to a level at which we stand a chance of avoiding dangerous climate change (and possibly also a renaissance in global nuclear fission)? Or does it shift the emphasis away from switching to more a sustainable renewable energy infrastructure that could avoid the use of fossil fuels and nuclear altogether?

In this meeting two leading voices in the debate give their opinions, separating the known from the unknown and kick starting an informed discussion about the pros, cons and politics of CCS.

Please note that attendance is by invitation only and there is a maximum of 25 places. 

This meeting is part of the Chatham House Fossil Fuels Expert Roundtable.

The eruption of another Icelandic volcano this week, ejecting ash plume into the atmosphere, reminds us afresh of Europe's vulnerability to 'low probability, high impact' events. Will Europe respond better this time? A forthcoming Chatham House Report shows that in such crises our governments and global businesses are in a better place to cope for a week - but no longer. This is because the full consequences of worst case scenarios are rarely factored in.

The ash cloud in 2010 is estimated to have cost the EU around $ 5-10 billion - the airlines bore about $ 1.7 billion in lost revenues and the tourism industry was hit hard. The greatest impact felt by many organisations was in human resources - the absence of stranded employees and dislocated management structures - but some companies fared better than others having learnt lessons from 9/11, SARS and other shocks to aviation. Businesses responding to a Chatham House survey on the impact of the ash cloud said that if the ash event last year had persisted just a few more days there would have been far more serious consequences.

This is not surprising given our dependence on long supply chains and the just-in-time business model. Since the earthquake and tsunami in March, for example, Japanese national infrastructure has been struggling to cope with fraying supply-chains and significantly slowed production. Carmakers and mobile phone manufacturers across the world were forced to halt or slow production as inventories of essential products - electronic components, car parts and fine chemicals - were quickly run down. Major cities for production, trade and travel are often badly affected by any international shocks, irrespective of the source, rendering the apparent resilience of having multiple suppliers meaningless.

A major scenario planning exercise conducted by Eurocontrol, five weeks ago suggests that the EU might be better prepared for an ash cloud disruption than a year ago. A key test for Europe now lies in whether member states will succeed in working together better in coordinating responses to ash threat and building public confidence in science-based risk management and planning.

Policy-makers face again the challenge of communicating a complex problem to a frustrated public. The ash cloud last year demonstrated the complication of crisis management in the media-saturated world, where opinion can be swayed by the most audible, the most active or the most politically powerful voices rather than the best informed or the most legitimate. There are important lessons here on the advantages and potential pitfalls of engaging stakeholders and the public via social and online media.

Our forthcoming report also shows a bias in the traditional media towards industry voices rather than those of the scientific community and policy-makers. During the crisis last year, there was scant public defence of the precautionary principles or safety, merely airlines duelling through the airwaves to step up pressure to remove the flight ban. First off the gate, Ryanair had already started its public relations battle last night. This time around, let's hope that traditional media will give greater airplay to voices beyond industry commentators, including scientists and experts. In-depth explanations of the science and technology involved in an event can help people assess the levels of uncertainty and risk involved in a situation, and what it means for them.

This is a transcript of a speech made by Ed Davey MP, Secretary of State for Energy and Climate Change, on 11 July 2012 at Chatham House.

In his first keynote speech on the subject, the Secretary of State outlined his vision for ambitious action on climate change.

Event details.

In the aftermath of the recent Rio+20 conference, James Bacchus will discuss the potential for establishing new trade, investment and other international rules and arrangements to promote sustainable growth. In particular, he will explore the interconnections and the international arrangements relating to food, energy, water, climate and other issues affecting global sustainable development.

Attendance is strictly by invitation only. To enable as open a debate as possible, this event will be held under the Chatham House Rule.

About Director's Breakfast Briefings.

The European Union has reached agreement on its 2030 climate and energy package in preparation for the next major international climate summit in Paris in December 2015. In the agreement member states have signed up to reducing greenhouse gas (GHG) emissions by at least 40% by 2030 – compared to 1990 levels. Currently emissions are approximately 20% below 1990 levels and so the 2030 target represents a continuation of current decarbonization trends, but it is below the rate of reductions required to meet the longer term objective of cutting emission by 80-95% by 2050.

However, the overall 40% reduction will still drive structural changes in Europe’s economy and the energy sector. This could and should be seen as an opportunity for the EU to become a world leader in the innovation of both the new technologies and systems, such as electricity storage, dynamic demand responses and the deployment of electric vehicles, all of which are experiencing a rapid increase in the size of their global markets.

But there are some concerns. The climate and energy package has put forward a collective target to double the current level of renewables so that it will provide at least 27% of energy by 2030. However, the target is binding on the EU as a whole but not on individual member states, which creates uncertainty and is further complicated by a lack of clarity on the enforcement mechanism, which remains vague. To avoid loss of investor and industrial confidence a transparent process needs to be rapidly developed that ensures compliance. 

The EU has also failed to give energy efficiency the priority it deserves, downgrading it to an indicative target (i.e. one that is aspirational only) of a 27% reduction in energy use from business as usual. However, this is equivalent to, at most, a 19% reduction from Europe's pre-recession trajectory. The weaker energy efficiency and renewable energy elements of the package reflects the resistance of a relatively small number of countries to further EU-wide legal commitments, either because they prefer market inducement or due to their reluctance to reform their energy sectors. The package also makes clear that the a reformed Emissions Trading Scheme will be the main instrument to achieve the GHG reduction target and proposes to accelerate the reduction of the cap on maximum permitted emissions. However, this would only kick in after 2021, meaning the scheme will remain relatively ineffective for at least another five years. 

The crisis in Ukraine and the potential implications for security of supply once again highlights the importance of both domestic energy production and common European approaches to energy suppliers. Every 1% of energy saved across the EU reduces gas imports by 2.6%, and a stronger target would do more to reduce dependence on Russian gas imports. The EU’s failure to adopt a more far reaching and binding target on energy efficiency is a missed opportunity given that it is one  of the only approaches that delivers on the three pillars on energy policy, namely environmental protection, competitiveness and security of supply, simultaneously.

It is important to note the progress that the EU has made in both meeting its climate targets over the last decade and the impact that this has had on its other energy policy objectives. Currently, the EU’s 2020 target for reducing GHG emissions by 20% has or is very close to being met, in part due to the economic downturn, but also due to efficiency, renewable energy and changing industrial patterns and technologies. Furthermore, the use of renewable energy is now estimated to save around €30 billion per year in imported energy, improving balance of payments and improving security of supply. Likewise improvements in energy efficiency have been shown since the turn of the century to have contributed to a 1% annual reduction in energy consumption in the EU.

But the EU is not alone in preparing national carbon reduction targets for the UNFCCC conference in Paris 2015. Both China and the US, the world’s first and second largest emitters, are preparing their own emission reduction plans. China announced in September that it would put forward a new target for the peaking of its carbon dioxide emissions as early as possible. It is suggested that this might be as early as in 2025, with the potential for peak coal use coming even earlier in 2020. The US has proposed to set limits on the emissions from new coal-fired power stations and a 30% reduction in US power sector emissions by 2030 (relative to their 2005 baseline), and President Obama is expected to go further with new climate measures next year.

In the year ahead all countries that are party to the UNFCCC are expected to put on the table their national carbon abatement plans for 2030.  Some will be conditional upon further international assistance and commitments. The package agreed by Europe has scope to respond to increased efforts by other countries. This could include increasing the EU’s own domestic target (currently framed as ‘at least 40%’) or through international offsets and climate finance. How the EU responds to other countries efforts will be a test of its global leadership on climate issues.

To comment on this article, please contact Chatham House Feedback 

African countries will be amongst the worst affected by climate change. High levels of poverty and underdevelopment combined with insufficient infrastructure exacerbate the already severe impact of global warming on resources, development and human security. In order to adapt to and mitigate the effects of climate change, Africa’s leaders need to implement more robust environmental policies, increase local human capacity and encourage renewable energy entrepreneurship. Within international fora, they must better coordinate their position as some of the smallest contributors to global warming.

Ahead of the upcoming UN conference on climate change in Paris, this discussion will examine the prospects for African countries to present a stronger collective voice within the international efforts against climate change, as well as the role that the international community and public and private partners can play in supporting local capacity and lower carbon economic growth.

The Liberal Party likes to think of itself as ‘Canada’s natural governing party’. Though they have been out of power for 10 years, and newly elected prime minister Justin Trudeau is relatively inexperienced, the party has deep and old networks across the country. The backroom is full of experienced old hands, including former prime ministers who have known Trudeau since he was a toddler. With a number of bold shifts promised in Canadian foreign policy, and a willingness to be fiscally expansive (Trudeau has said he is willing to run deficits for three years to implement their policies), the change is likely to be dramatic, fast and unrelenting.

International engagement

The Liberals’ proposed new Canada has a hint of nostalgia for a time when Canadians thought of themselves as a force for good in the world. There is likely to be a large-scale reengagement with the international community, especially the United Nations, not only on climate policy, but also peacekeeping and disaster response. Canada’s French-speaking experts make it well placed to engage in crisis-hit French-speaking countries while carrying somewhat less colonial baggage. Meanwhile, the Liberals have promised to withdraw Canadian forces from the combat mission against ISIS in Iraq, pledging instead to reorient their focus towards aid.

Science-based policies

Trudeau has the backing of a very deep bench of experienced parliamentarians, some of whom have been waiting a long time to get back in the governing game. They include Stéphane Dion, the former environment minister who gained respect for his chairing of the 2005 UN climate change conference in Montreal, and Marc Garneau, former astronaut and president of the Canadian Space Agency. This will be a government that understands and values (and has promised to restore funding for) scientific research.

This means more investment in climate resilience, renewables and other forward planning policies, but also a reexamination of some of Canada’s long-standing strengths, including Canada’s fisheries. Under the previous government, over half-a-dozen critical fisheries research libraries were shut down, in some cases with large-scale loss of data. A more science-based fisheries policy, combined with the promised funding to the Royal Canadian Navy, may result in a reinvigorated and coordinated Canadian fisheries policy. This would become particularly important in a time of global food constraints.

‘Nation-to-nation’

Trudeau’s stated goal of establishing ‘nation-to-nation’ relations with Canada’s indigenous peoples has potentially global implications.

Through treaties, Canada’s First Nations can stake a claim to about a third of Canada’s landmass, including resource rich areas. They own or control access to land that contains oil, gas, uranium, gold, diamonds and much more. China, for one, realized the potential power of First Nations as far back as 2008, when Beijing invited over two dozen indigenous leaders to China to talk business. During that trip, Peguis Chief Glenn Hudson explained that the trip was ‘an important step for us in moving forward. Our future is not only in Canada, but partnering with other countries.’

Trudeau’s ‘nation-to-nation’ statement acknowledges the strengthening role of First Nations in Canada’s resource policy. Indigenous communities have been among the most adversely affected by oil sands development and, in other parts of Canada, have successfully blocked resources extraction or transit. For example, in May, the Lax Kw'alaams Band refused to allow a proposed multi-million dollar Petronas LNG project to be developed on their land over concerns it would affect their economically and culturally important salmon runs.

Real First Nations engagement with resource management has the potential substantially change Canada’s energy, environment and resources profile. First Nations in eastern Canada have already blocked hydro development that could power much of the northeastern United States and, in a time of pipeline expansion, First Nations might become instrumental in deciding if more pipelines will run north-to-south, towards the border with the United States, or east-to-west, towards the Pacific and the markets in Asia.

Energy sector

At the same time, while Trudeau said he was against the Northern Gateway pipeline, in large part because of how it would affect the people of the Pacific coast, he backed Keystone XL. However, he is unlikely to push for it in the face of a veto by President Obama. Also, low fossil fuel prices contributed to the election in May of a left-leaning provincial government in the badly hit oil heartland of Alberta. If prices stay low, that could very well combine with Liberal campaign promises to put a coordinated national price on carbon and to phase out fossil fuel subsidies, additionally reshaping Canada’s energy landscape..

Agriculture and the Trans-Pacific Partnership

The Liberals also have a stated goal of investing in a more innovative and safe agricultural sector, while defending the interests of Canadian farmers. This dovetails with their promise to openly examine and discuss the Trans-Pacific Partnership (TPP) before ratification. Canadian dairy farmers in particular were concerned about some of the TPP provisions but, without access to the details of the text, it was difficult to estimate how the sector would be affected.

One proposed agricultural policy that may have widespread economic implications is the legalization, regulation and taxation of marijuana. As some states in the United States have found, this has the potential to be economically beneficial and, for Canada, a possible major boon to cross-border tourism.

In a myriad of small ways, and a few big ones, the new Liberal government plans to change Canada’s international role and domestic landscape. This is one to watch.

To comment on this article, please contact Chatham House Feedback 

Summary

• Plans for an EU-wide Energy Union are taking shape, following the European Commission’s adoption in February 2015 of a ‘Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy’. The strategy underlines the EU’s ambition to attain ‘secure, sustainable, competitive, affordable energy for every European’.
• The initiative seeks to transform energy markets and energy/climate policy across the EU. Its goals include cross-border coordination and integration in energy security, supply, market operations, regulation, energy efficiency, low-carbon development, and research and innovation.
• There is an important foreign policy aspect to the Energy Union, given the imperative of managing security and supply risks in Europe’s neighbourhood and further afield. By addressing structural divisions between member states, the Energy Union could have a marked beneficial effect on the EU’s capacity to conduct a unified and effective foreign policy.
• Development of the Energy Union presents abundant challenges, however. Policy and legislative changes will need to be coordinated across 28 countries. Variations in EU member states’ attitudes to security and energy policy may lead to differences in, or clashes between, priorities. The wider context is also complicated. Interrelated challenges rooted in broader policy issues include the partial transition to low-carbon energy, and concerns over competitiveness relative to other major economies.
• The current EU approach to energy security and infrastructure focuses on natural gas. This ‘gas first’ approach risks crowding out other responses to the energy security challenge. It could result in the creation of ‘stranded assets’, if the future gas demand on which investments are predicated does not match projections. A narrow focus on new gas infrastructure could also impede development of other dimensions of the Energy Union.
• The markets for coal, oil, gas and renewables are changing significantly. The shale oil and gas ‘revolution’ in the United States has altered the economics of hydrocarbon fuels, and the plunge in oil prices since mid-2014 is causing energy businesses in the EU to reassess investment plans.
• The EU is rapidly expanding the use of renewable energy. Dramatically falling prices for renewables will challenge traditional energy utility business models. How the Energy Union enables market access for new business models will be key to determining future energy trajectories.

Summary

• The Paris Agreement, reached at COP21, was a triumph of diplomacy. The deal can be characterized as: flexible, combining a ‘hard’ legal shell and a ‘soft’ enforcement mechanism; inclusive, as it was adopted by all 196 parties to the UNFCCC and is therefore the first truly global climate deal; messy, as the bottom-up process of creating nationally determined contributions means the system is unstandardized; non-additive, as the contributions do not currently deliver the agreement’s stated long-term goal of keeping the rise in global average temperature to ‘well below 2˚C’; and dynamic, as the deal establishes a ratchet mechanism that requires more ambitious contributions every five years.
• The next five years are critical for keeping the below 2˚C goal within reach. A ‘facilitative dialogue’ starting in 2018 will give states the opportunity to revisit their contributions in advance of the agreement entering into force in 2020. International forums, such as the G7 and G20, can play a crucial role in kickstarting these efforts.
• The ‘coalitions of the willing’ and clubs that were launched under the Lima-Paris Action Agenda provide an innovative space for state and non-state actors to unlock transformational change. However, it is important that these groups set specific and measurable targets to ensure effective delivery of objectives.
• The post-Paris regime implies a significant role for civil society organizations. However, in many countries the ‘safe operating space’ both for these organizations and for the media is shrinking. Expanding the capacity of civil society and the media in areas such as communications, litigation, project implementation and technical expertise will be important if they are to support the regime effectively.

In May 2016, Chatham House published a research paper that assessed the options for the UK’s climate and energy policy in the event of a British vote to leave the EU. It determined that:

• The UK’s energy market is deeply integrated with that of its European neighbours and that it would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks. A degree of continued adherence to EU market regulations, energy efficiency standards of appliances, environmental and governance rules would be inevitable. 
• The EU’s collective negotiation on international climate issues has given the UK greater political weight than any member state has alone.
• The EU’s coordinated approach in engaging with major fossil fuel producers such as Russia and countries in the Middle East has helped support price stability and security of supply, including through infrastructure investment to make existing pipeline systems more efficient and improve storage and capacity.   

In light of the decision to leave, Chatham House is hosting a roundtable to reassess the options for a future UK-EU energy and climate change partnership. The meeting will bring together those experienced on UK and EU policy in both climate change and energy and explore the short and medium-term climate and energy policy considerations. 

Attendance at this event is by invitation only.

Over the next two decades, a combination of ‘circular economy’ approaches and distributed manufacturing methods such as 3D printing raise the prospect of fundamental changes to the nature of production, the reconfiguration of supply chains and changes to patterns of resource consumption – with profound implications for sustainability. This roundtable will bring together expert participants from companies, government, civil society and academia to discuss the state of innovation in the ‘circular economy,’ with a particular focus on the approaches and activities of entrepreneurs and investors, what is needed to scale up and accelerate innovation, how to track and measure progress, and how to ensure that innovation in the ‘circular economy’ makes a significant contribution to the meeting of short and medium term climate and sustainability goals.

Attendance at this event is by invitation only. 

Summary

• The use of wood for electricity generation and heat in modern (non-traditional) technologies has grown rapidly in recent years, and has the potential to continue to do so.
• The EU has been, and remains, the main global source of demand, as a result of its targets for renewable energy. This demand is largely met by its own forest resources and supplemented by imports from the US, Canada and Russia.
• Countries outside the EU, including the US, China, Japan and South Korea, have the potential to increase the use of biomass (including agricultural residues as well as wood), but so far this has not taken place at scale, partly because of the falling costs of competing renewables such as solar PV and wind. However, the role of biomass as a system balancer, and its supposed ability, in combination with carbon capture and storage technology, to generate negative emissions, seem likely to keep it in contention in the future.
• Although most renewable energy policy frameworks treat biomass as though it is carbon-neutral at the point of combustion, in reality this cannot be assumed, as biomass emits more carbon per unit of energy than most fossil fuels. Only residues that would otherwise have been burnt as waste or would have been left in the forest and decayed rapidly can be considered to be carbon-neutral over the short to medium term.
• One reason for the perception of biomass as carbon-neutral is the fact that, under IPCC greenhouse gas accounting rules, its associated emissions are recorded in the land use rather than the energy sector. However, the different ways in which land use emissions are accounted for means that a proportion of the emissions from biomass may never be accounted for.
• In principle, sustainability criteria can ensure that only biomass with the lowest impact on the climate are used; the current criteria in use in some EU member states and under development in the EU, however, do not achieve this as they do not account for changes in forest carbon stock.

Also see Woody Biomass for Power and Heat: Impacts on the Global Climate, which assesses the impact of the use of biomass for energy on greenhouse gas emissions, how these are accounted for under international climate accounting rules, and analyses the sustainability criteria currently in use and under development to minimise negative impacts.