Joachim Faber: They look at what the G8 countries, the world’s major economies, have achieved in the fight against climate change. Each scorecard ranks a country’s performance: have they reduced their greenhouse gas emission since 1990, how are they doing right now, and what kind of policies do they have for the future.
Some like the United Kingdom or France are in the lead; others like the United States lag behind. But what we really see is that they all fall short on what they would have to achieve to prevent dramatic climate change.
Faber: With greater political momentum, we can win this race
Dr. Faber, what are these climate scorecards about?
Joachim Faber: "We need more support for renewable energies in the G8"
What is the basis for the report?
Faber: The research has been conducted by Ecofys, an independent consultancy with a good reputation for analytical work on climate change and specialized in renewable energy and climate policies. We have commissioned this study together with our strategic partner WWF. The scorecards are only one product of our cooperation, but a very important one.
We think that the G8 countries have a responsibility to be high achievers in the race against climate change, even when the global economy is under stress. Countries like Germany or the United States need to be role models trailblazing the way to steer the world towards a low carbon, clean energy economy.
What would the G8 countries have to do to make a difference?
Faber: Research from the UN International Panel on Climate Change says that we have to massively reduce greenhouse gas emissions by 2050 to limit temperature increase to a manageable level.
What we need now is credible political momentum. According to the report leaders at the upcoming G8 Summit in Japan should commit to binding long-term targets for emission reductions as close to 40 percent as possible by 2020. Then we would stand a good chance to win this race.
The report also looks at emerging countries like China and Brazil. Do they also have to do more as well?
Faber: That’s an interesting question. We have seen that greenhouse gas emissions in countries like China have grown a lot recently, but per capita they are still way below the global average. And these countries simply cannot be measured with the same ruler as industrialized countries, and hence are not part of the ranking.
If we want to prevent drastic increases here, industrialized countries will have to assist these countries to bring about the move to a low carbon development. Yvo de Boer, the head of the UN Framework Convention for Climate Change, has made an interesting proposal. He said the next Kyoto-agreement should allow for governments to emit bonds to finance renewable energy projects that help reduce CO2 emissions. Private investors can then buy those bonds supporting countries on their path to a low-carbon economy.
How could such low carbon development look like?
Faber: Particularly important is the promotion of a global carbon market. But right now carbon markets are not where they could be. We need clear and more efficient regulation. We need a truly global market where CO2 emissions are priced on a credible, comparable, and solid basis.
The EU emissions trading system is the closest thing we have to such a carbon market. But it could be further improved if governments would not simply allocate emissions certificates, but auction them by 100 percent to make full use of market mechanisms.
The resulting CO2 price would set energy pricing straight. Electricity from coal that is still very important in G8 countries like Germany, the United States, and China would over the mid-term lose its edge over renewable sources.
We generally need more support for renewable energies in the G8. The scorecards show that Germany is a positive exception, because of a benchmark regulatory approach. But with a global carbon market, renewables could compete without subsidies.
Why does a profit oriented company like Allianz SE lobby for such progressive action?
Faber: First of all, it is our corporate responsibility to contribute to preventing developments that could negatively change the way we live. And as an insurer and risk managers, it is our business to protect our clients from suffering damage and prevent losses. Just to give you an example, insurance premiums paid to victims of natural catastrophes have increased 15-fold over the past 30 years.
If we react now, we can alter this trend and create a whole new range of growth markets. Sure, tangible action will not be for free. Large parts of today’s economies will need a low carbon restructuring and we need to be aware of winners and losers. A shift to a low carbon economy by 2020 needs enormous clean energy investments. Here, we will need more climate change focused investments also from sovereign wealth funds and governments. But most of these investments will come from the private sector and from individuals.
But why should private investors or state funds spend so much money?
Faber: One huge field of opportunities is that of clean technologies. We see an enormous potential for investment, growth and jobs. Financial institutions are already key players in renewable energy and energy efficiency. It simply pays to save energy and make the switch to low carbon business. What the global community has to provide to make this engagement happen is efficient market mechanisms with minimal interference.
That is also why Allianz SE and the WWF support the Ecofys research and the scorecards. We want to gain a better understanding of the changing investment and regulatory landscape. And it helps us develop new insurance products and funds that support the fight against global warming.
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