COP 27: A New Approach
It was six men of Indostan To learning much inclined, Who went to see the Elephant (Though all of them were blind),
And so these men of Indostan Disputed loud and long, Each in his own opinion Exceeding stiff and strong,
The disputants, I ween, Rail on … And prate about an Elephant Not one of them has seen!
---with apologies to John Godfrey Sacks (1816-1887), The Blind Men and the Elephant
By Robert C. Hinkley*
1 May 2022
The next worldwide conference of the parties to stop global warming is scheduled to take place in Sharm El-Sheikh, Egypt this coming November (COP 27). Previous COPs (e.g., COP 26 Glasgow, COP 21 Paris, etc.) have been what businesspeople call “lots of good meetings,” but yielded little in terms of reducing the global emission of greenhouse gases (GHGs). Time is running out. COP 27 needs to achieve more.
This time the parties must take a big bite out of emissions. This will involve a change in approach to past conferences. Instead of talking about reducing emissions generally, COP 27 participants should commit their organizations to eliminating specific sources of the global emissions now and leave the reduction of emissions from other sources for COP 28 and beyond.
The invitation list to Sharm El-Sheikh should include the companies which can quickly reduce the greatest amount of GHG emissions: electric power generators and motor vehicle manufacturers. Combined, these two industries account for more than 25% of total annual GHG emissions globally. The technology already exists to stop these emissions. All that is needed is the willpower.
So far, these companies have had little incentive to reduce emissions. They have huge amounts of capital invested in their existing facilities. Converting to new non-emitting facilities could force the write-off of these investments. Continuing to burn fossil fuels also offers them a cost advantage over alternative fuel sources. This translates into a barrier to entry for the alternatives. These factors have encouraged the two industries to drag their feet, prolonging GHG emissions at the expense of the environment.
The Role of Government
So far, the role of government at COPs has been to convene the conference and issue the communique at its conclusion. Success was defined by reaching an agreement where each country would pledge to reduce emissions in a manner which would put a lid on worldwide temperature increases.
This made the conference’s success dependent upon government participants going back home and either cajoling those they governed into reducing emissions voluntarily or enacting laws which would require it. This approach was doomed to fail from the start. They found it impossible to translate the good feeling prevalent at the COP into concrete action at home. They lacked the ability to develop a plan which could be sold politically in the face of strong opposition.
Governments do at least two things well. They can regulate and prohibit behaviour that is harmful to the public interest. They can also fund action that helps promote the common good. Fulfilling these tasks should be governments’ main role at Sharm El-Sheikh.
The key to solving the global warming problem will not come from relying on political leaders to do what they cannot. It will come from government requiring more from business, companies which already have the necessary expertise, and which can be held accountable.
The companies which generate electric power and make motor vehicles won’t change voluntarily. At least not quickly. The only way to speed them up is to change the law. This is where government comes in.
A New Approach
Everyone knows worldwide GHG emissions must be cut quickly. Focussing on the emissions created by the power generation and motor vehicle industries will make this possible.
Each government should arrive at COP 27 ready to pass legislation, which will, by an outside date (no later than 31 December 2037), prohibit the emission of GHGs from power generating stations and motor vehicles. The timetable for stopping the manufacture of GHG emitting vehicles can probably be shorter. Those countries which do not manufacture vehicles (such as Australia), can start increasing import tariffs for fossil fuel burning vehicles and providing incentives regarding electric vehicles.
The world need not wait fifteen years for the power companies to start converting their generation facilities. At COP 27, each government should bring a list of generating stations in its jurisdiction and a timetable (arrived at in consultation with station owners), for stopping emissions and replacing capacity. Government should be willing to offer financial incentives for facility owners which comply prior to the deadline.
A few countries might find fifteen years too short to find replacement sources of power. They should bring a timetable to which they can commit and a list of factors which could bring the timetable forward. To the extent financing is an issue, governments, the World Bank, and other development organizations should be encouraged to offer financial assistance.
Since the first COP in Berlin in 1995, it was probably inevitable that we would arrive at the point where we find ourselves in 2022. Such meetings were like the six men from Indostan who each touched a different part of the elephant and tried to describe the whole.
Previous COP participants came from all over and with a variety of backgrounds. Each brought his or her own expertise (e.g. environmentalists, economists, financiers, emitters, politicians, and activists) and good faith. None had ever solved a problem of such magnitude and complexity before. All had blind spots. No one had a plan. No one was assigned responsibility for working it all out and implementing a solution.
Like the six men, the vision necessary to solve the problem was lacking. The outcome was lots of good meetings, but no effective results. People learned more than they already knew, but they failed to meet the challenge. It’s time for this approach to end.
Passing legislation requiring power generators and vehicle manufacturers to stop their destructive behaviour will provide the impetus for business to act. The power generation and vehicle manufacture industries will leave the conference with commitments to stop emissions. Already having the necessary expertise, the change in the law will motivate them to get on with the job, facility by facility.
Governments will leave COP 27 not with a self-imposed pledge to reduce their country’s emissions generally. Instead, their job will be to see that companies in two industries satisfy their specific agreements to stop emissions. Government participants will leave the conference with the satisfaction of knowing they provided the leadership necessary to bring the world back from the precipice of an environmental disaster.
COP 27 should be focussed on eliminating two of the biggest sources of GHG emissions. Changing the approach to COP 27 from past conferences and focussing on two industries does not mean an end to trying to reduce GHG emissions from other sources. Work there should go on, just outside the meeting.
COP 28 is scheduled to be held in the United Arab Emirates in November 2023. Hopefully, it will open with a report on the significant progress made fulfilling the promises of COP 27. Next year’s conferees can then turn their focus to eliminating emissions from other sources.
*Robert C. Hinkley is a former U.S. finance lawyer whose expertise includes equity, debt, project, and structured financing. His practice included the financing of power generation, including the financing of alternative energy facilities. He is a dual citizen of Australia and the United States and now lives in Berry, NSW Australia.