Yesterday President Barack Obama announced details of his proposed $6 billion energy efficiency rebate program, known as Home Star, at Savannah Technical College in Georgia. Informally known as “Cash for Caulkers,” the Home Star program would provide immediate rebates of up to $3000 to homeowners who invest in making their homes more energy efficient. President Obama described how Home Star helps Americans on several fronts:

Now, we know this will save families as much as several hundred dollars on their utilities. We know it will make our economy less dependent on fossil fuels, helping to protect the planet for future generations. But I want to emphasize that Home Star will also create business and spur hiring up and down the economy.

With unemployment in the construction industry at almost 25 percent, it is imperative that the Obama Administration implement innovative, effective programs to spur job creation in what has been termed the tool-belt recession. The tool-belt recession has a deep and far-reaching impact on communities. Construction job losses touch every state in the union and hit local economies hard, spilling over to other parts of the economy as well. Job loss in manufacturing industries tied to construction is higher than in manufacturing as a whole. Many construction related industries have shed 20 percent to 30 percent of their jobs since the recession began. Jobs in the construction sector and related industries are suffering more compared to other parts of the economy. It is time for a national response to this tool belt recession. Here are some of the numbers:

• The unemployment rate for experienced workers in construction was 24.7 percent in January 2010.
• Total construction payroll employment has dropped by 2.1 million jobs since 2006, with residential construction down by 1.3 million, or 38 percent.
• For 2009, 12.4 percent of all unemployed workers were previously employed in the construction industry.
• There have been 134,000 jobs lost (10 percent) in construction-related retail, such as building supply stores and lumber yards, since December 2007, with 186,000 lost (14 percent) since July 2006.

With demand for construction jobs at near depression levels, stimulating consumer demand for residential energy efficiency is a smart business. It creates high-paying jobs for idled construction workers, boosts sales of American-made building materials, and saves consumers money. American companies are ready to hire back crews if we can jumpstart demand for projects. Home performance contracting for energy efficiency is one bright spot on the horizon for the building trades today.

Matt Golden, CEO of home performance retrofit contractor Recurve, and co-author of our study explains:

The tool belt recession is devastating. There is an urgent need in every state of the union to generate skilled, high-paying, long-term construction and manufacturing jobs to grow our economy. But there is hope. As an employer in the hard-hit state of California, I have seen my efficiency business grow by 60 percent, even as the construction industry has lost over 35 percent of construction jobs, around me.

It’s time to launch a national Home Star program which includes incentives for homebuyers to invest in the energy efficiency of their homes, which will jumpstart demand for labor. Congress can quickly create jobs with policies to expand investment in commercial and industrial energy efficiency and financing for retrofit jobs.

Read the whole memo about taking on the tool belt recession here.

Sen. John Barrasso (R-WY) introduced legislation on February 24 that would prevent the SEC from forcing companies to disclose their climate-related risks.  CAP energy policy analyst Richard W. Caperton explains why that is a bad idea in this repost.  In the AP photo, Barrasso, left, is accompanied by Sen. Lamar Alexander (R-TN), center, and Sen. James Inhofe (R-OK).

A group of 56 investment-industry leaders representing $2.1 trillion in assets applauded the U.S. Securities and Exchange Commission yesterday for taking action to ensure that companies disclose their climate-related risks to investors. The leaders stated that the SEC’s Guidance Regarding Disclosure Related to Climate Change “will provide us with significantly improved information about the material risks and opportunities faced by our portfolio companies.” This reinforces a fundamental principle of the American economy: Investors need transparent information on companies to make informed decisions.

Yet there is a movement in the Senate that would deny investors access to that critical information. Sen. John Barrasso (R-WY) introduced legislation on February 24 that would prevent the SEC from forcing companies to disclose their climate-related risks. His bill is just two sentences long, but would have the disastrous effect of allowing companies to hide information that investors need to make smart decisions.

Sen. Barrasso may not be as famous as Sen. James Inhofe (R-OK), but he has built up a solid record in opposition of any action on climate change, no matter how important. He loudly protested the CIA’s establishment of a Center on Climate Change and National Security, saying, “The CIA’s resources should be focused on monitoring terrorists in caves—not polar bears on icebergs.” This ignores the well-documented fact that climate change will breed terrorists, create more conflict requiring U.S. military action, and hinder military operations. The most recent Quadrennial Defense Review states, for example, that climate change “may act as an accelerant of instability or conflict,” a view that is echoed by 11 retired generals and admirals in the CNA Corporation’s report, “National Security and the Threat of Climate Change.”

Sen. Barrasso doesn’t want the CIA to do their job and now he doesn’t want the SEC to do its job, either. In introducing his legislation, the Maintaining Agency Direction on Financial Fraud Act (the acronym is a reference to the massive Ponzi scheme run by disgraced investment advisor Bernard Madoff), he said, “In the aftermath of [the Madoff scandal], it’s clear that the SEC should focus on its core mission of protecting American investors and maintaining fair markets. Instead, the SEC now wants to devote time and resources to climate change. This is absurd.”

Sen. Barrasso’s reasoning is flawed in two ways. First, he misrepresents the goals of the Securities Act of 1933, which requires that investors receive financial and other significant information concerning securities being offered for public sale. Second, he mistakenly thinks that climate change information isn’t relevant to investors.

The fact is that investors need information on the climate-related risks companies face. The SEC recognizes this, which is why it published “interpretive guidance” on disclosure related to climate change. This guidance doesn’t represent new law, but it does clarify what companies should disclose in their annual reports about their exposure to climate-related risk in terms of both climate change legislation and climate change itself. For example, companies whose business models rely on the ability to freely emit carbon or whose supply chains are especially susceptible to weather-related disruptions should make that information available.

As the 56 leaders told the SEC, investors need this information. Financial markets work best when investors have access to information they can trust. This is why the SEC requires companies to publish audited financial statements.

There is ample evidence that investors also need access to climate-related information. For example, Alexander Bassen and Sebastian Rothe have found that carbon-intensive utilities fare worse on European stock markets than low-carbon utilities. That is, European investors reward low-carbon utilities. This is likely driven, at least in part, by the fact that European utilities face a price on carbon, which drives up operating costs for carbon-intensive utilities. There will certainly be some type of carbon emission limits in the United States in the coming years, which will put the same pressures on American utilities. Investors evaluating utility stocks need to know the utilities’ exposure to these limits and how the limits will affect the utilities’ financial performance.

At the same time, Goldman Sachs Sustain has found that carbon intensity is responsible for large proportions of the difference in stock valuations in certain U.S. industries such as airlines, mining, and utilities. Here again, investors are rewarding low-carbon companies. The likely dynamic is that investors are aware that some industries will be affected by carbon emission limits in the future and are including this calculation in their investment decisions within those industries.

But investors only reward low-carbon companies in certain sectors. Most people are aware that electric utilities have some exposure to carbon emission limits that will affect their financial performance, but not everyone is aware that the food and beverage industry is also relatively carbon intensive (as seen on page 12 of the same Goldman Sachs Sustain analysis). This is where SEC guidance is most critical: in areas where investors aren’t aware of the risks. Food and beverage companies are as carbon intensive as automotive manufacturers, yet relative carbon intensity only explains a small part of valuation differences in food and beverage companies, while it’s hugely influential in how automotive manufacturers are valued.

If Sen. Barrasso’s bill were to become law, investors would remain ignorant of the significant risks in sectors such as the food and beverage industry. Sen. Barrasso may not care that the world’s climate is changing, but his legislation unfairly stacks the deck against people who want access to necessary information before making investments. His bill goes well beyond climate change; it discourages corporate risk disclosure and prohibits responsible investing.

As the investors who manage $2.1 trillion in assets accurately write, “The SEC was founded on the principle that the purchase and sale of securities should be an honest bargain based on full and fair disclosure. The climate change disclosure guidance carries that tradition and legal requirement forward to a pressing challenge facing businesses in this century.”

Congress and the SEC must not bow to pressure to modify or withdraw the Guidance Regarding Disclosure Related to Climate Change.

Workers stand outside the Rebuilding Center in Portland, OR, which is the nation’s largest nonprofit for salvaged construction and remodeling materials.  The Center offers employees living wage positions with benefits. Portland created more than 20,000 green jobs in 2007 alone. This is a CAP repost.

Clean energy jobs continue to make inroads in the U.S. economy. Growth in these jobs was a robust 9.1 percent between 1998 and 2007 compared to 3.7 percent overall, and in January President Obama promised $2.3 billion in Recovery Act Advanced Energy Manufacturing Tax Credits for clean-energy manufacturing projects nationwide that will create tens of thousands of clean-energy jobs. Meanwhile, the stimulus bill is pumping $30 billion into the clean-energy sector, and aggressive smart grid deployment could create 270,000 U.S. jobs and a further 138,000 if our smart grid technologies are exported to a global market.

Some regions have become green jobs strongholds. Here are the top five U.S. cities that are seeing the most growth:

San Francisco

California leads the nation in clean-energy jobs with roughly 125,000—and San Francisco is a big source for these jobs. The Clean Edge report identifies the Bay Area as the number one metro area for clean technology job activity, and San Francisco recently passed $100 million in revenue bonds to support renewable energy projects. More than 50 percent of the city’s commuters travel on public transportation and 20 big construction projects have recently applied for LEED certification.

Boston

It’s no surprise that the Greater Boston area is a leader in green technology. After all, it has the highest concentration of colleges and universities of any metropolitan area in the world. Boston—including Worcester, Lawrence, Lowell, and Brockton—ranks fourth in the Clean Edge survey of 15 top U.S. metro areas for clean-tech job creation. And two big sources of green construction and engineering jobs in Boston are wind power—it’s the city’s third-largest fuel source—and the fact that new buildings have to be constructed to meet LEED certification standards.

Mayor Tom Menino appointed an Energy Management Board in 2003, which studied energy use in 362 municipal buildings and identified potential savings. For the second consecutive year, Menino’s Boston Green Awards included a separate category for bike-friendly businesses.

Detroit

There’s good news for Detroit despite Michigan’s 15.3 percent unemployment rate. Department of Energy green technology grants to fund factories and create green jobs will tap into the Motor City’s skilled automotive workforce to bring hybrid and electric technology to the forefront of the American auto industry. Michigan had already created more than 22,000 clean-tech jobs by 2007, and the new federal grants will make those numbers grow. Automotive companies not based in Detroit have recently opened hubs in the city, and a mechanical engineer working on plug-in hybrids and electric vehicles in Detroit can expect to make $63,600 median pay with a bachelor’s degree, reports Clean Edge.

Portland

Oregon may struggle with unemployment like the rest of the United States, but with more than 20,000 clean-energy jobs created in 2007 alone—the most in the nation—it’s clear that sustainable Portland is the place to be. The city gets half of its power from renewable energy sources, 35 percent of its buildings have been certified by the U.S. Green Building Council, and a quarter of the workforce commutes to work by bike, carpool, or public transportation. The city’s $50 million “Grey to Green” initiative, which began in July 2008, aims to add 43 acres of ecoroofs, plant 33,000 yard trees and 50,000 street trees, and restore native vegetation while halting the spread of invasive plants to better manage stormwater—all of which will help create a green-collar workforce for Portland’s already green economy.

New York City

There are plenty of opportunities for green jobs in New York City. “Growing Green Collar Jobs,” a collaboration between 50 community, labor, and private sector groups in New York City, supports organizations such as Sustainable South Bronx, which has worked since 2001 to move South Bronx residents from welfare to green-collar jobs through education, outreach, and programs like “Greening the Ghetto.”

Mayor Michael Bloomberg launched PlaNYC 2030 in 2007, a program with 127 greening initiatives, including $1 billion for retrofitting buildings to boost energy efficiency and reduce greenhouse gas emissions by 30 percent, create homes for more than 1 million New Yorkers, and ensure that all residents live within a 10-minute walk to a park. Meeting these goals will create thousands of green-collar jobs in a variety of fields from urban forestry to renewable energy. In addition, 80 percent of Big Apple residents use public transportation, which is a boon for the city’s goal to have the cleanest air quality of any major U.S. city.

Related Post:

• Climate policy and jobs: What economists know

This repost comes from economists at E3 Network:

I. Addressing Climate Change Can Lead to Net Job Growth in the United States

Many economists believe that due to the global downturn, the US will experience high rates of unemployment (>6%) for a number of years to come. However, a steady shift toward climate protection will likely boost net job growth in the US:

• Reduced oil imports would create jobs. Reducing oil imports can save hundreds of billions of dollars each year on imported oil. Rather than send this money abroad, it can be spent at home, creating jobs. We have the potential to create 900,000 new jobs in the US for very $100 billion decrease in oil imports2.

• Carbon solutions invest in labor intensive domestic jobs and domestic resources. The solutions to climate change—ranging from  renewable energy, to high-speed rail, to smartgrid investments, to sustainable biofuels—depend more on domestic resources, and also use more labor per dollar invested, than do fossil fuel alternatives. One recent study suggested that a switch towards carbon-reducing investment could create 1.7 million near term jobs (Pollin et al. 2009).
• The United States can create jobs by re-assuming technology leadership. China is moving aggressively to capture leadership in solar, wind, high-speed rail, and other key clean energy solutions. But as recently as 1995, the US was the technology leader in wind and baseload solar”—solar thermal. US utilities today are purchasing these technologies from China, Denmark and Spain. By reassuming technology leadership, and adopting a policy framework to support clean, homegrown energy industries, the US can create new jobs by selling into an emerging, massive global market.
• Investment in clean energy can mobilize capital to end the recession. The current downturn, resulting from the collapse of an asset bubble, is the hardest type from which to recover. In these types of recessions, self-corrective mechanisms are weak. Concerned about lack of future demand, businesses scale back investment, which has a multiplier effect, holding back recovery. A sustained national effort to rewire the country with clean energy, including a cap and trade system as a central driver, could mobilize large-scale private sector investment and initiate a positive feedback process: investment –> jobs –> income –> investment –> jobs –> sustained growth.

II. Addressing Climate Change Will Not Result in Significant Job Loss

In spite of heated rhetoric claiming that past episodes of environmental regulation have been “job-killers”, numerous independent studies show:

• Plant closings and layoffs as a result of environmental regulation are very rare. Repeated studies show that layoffs attributable to environmental regulations account for only 1/10th of 1% of all layoffs nationwide: around 1,000-3,000 jobs per year across the entire United States. For example, less than 7000 jobs were lost between 1990-1997 as a direct result of the Clean Air Act Amendments taking effect. Over that same period, 10 million US workers were laid off for non-environmental reasons (Goodstein 1999).
• Proposed climate legislation will not be costly and will have little overall negative impact on employment through 2030. In sharp contrast to the “sky-will-fall” claims of industry trade groups, independent academic and government studies of US climate legislation, from MIT; Harvard’s Dale Jorgensen; the Energy Information Administration; The Research Triangle Institute; and the Department of Energy’s Pacific Northwest National Lab, see very low short-term costs and negligible impacts on long-run job growth.
• Environmental spending creates jobs that offset losses. Compared to overall spending in the economy, on a per dollar basis, spending on environmental protection and clean-up employs twice as many workers in construction (11% versus 4%) and 25% more in manufacturing (20% versus 16%) (Pollin et al. 2009). A study by Resources For the Future’s Morgenstern et al. (2002) of the heavily regulated steel, petroleum, plastics, and pulp and paper industries concluded: “While environmental spending clearly has consequences for business and labor, the hypothesis that such spending significantly reduces employment in heavily polluting industries is not supported by the data.”
• Few firms flee the United States to “pollution havens” in poor countries. Environmental costs are generally below 2% of total business costs. Firms that do leave the US generally do so in pursuit of lower labor and health costs, expenditures forming a much higher percentage of their total costs. Economists searching for evidence supporting widespread flight of polluting industries have not found significant effects. In the climate-change case, the handful of energy intensive industries that might be subject to competitive pressure from abroad can be shielded with WTO-sanctioned import tariffs.
• Climate action will heavily impact one group of workers: coal miners. With or without greenhouse gas controls, coal industry employment is predicted to fall significantly by 2025 as a result of mechanization. If carbon emissions are restricted, we are likely to see a further decline of jobs of about 1,500 per year (Goodstein 2009). The nation has a clear obligation to invest heavily in adjustment assistance to help miners who lose from climate stabilization efforts. However, as Senator Byrd from West Virginia has stated, “To be part of any solution, one must first acknowledge a problem. To deny the mounting science of climate change is to stick our heads in the sand and say ‘deal me out.’”

By Eban Goodstein, Director, Bard Center for Environmental Policy, Kristen Sheeran, Director, Economics for Equity and the Environment Network, Peter Dorman, Evergreen State College, John Laitner, Director, Economic and Social Analysis, American Council for an Energy-Efficient Economy, Jonathan Isham, Middlebury College.

For more Detailed Information:

A more detailed discussion of the issues explored here can be found in The Trade-off Myth: Fact and Fiction About Jobs and the Environment, Eban Goodstein (Island Press 1999). The four industry study is “Jobs Versus the Environment: An Industry-Level Perspective“, Richard Morgenstern et al., Journal of Environmental Economics and Management, May 2002 43(2). For a review of the MIT, EIA, Research Triangle, DOE, and Jorgenson analyses of the costs of proposed US climate policy, see “The Economics of 350” Frank Ackerman et al. (E3 Network 2009). The estimate of 1.7 million jobs is from “How the economic stimulus program and new legislation can boost US economic growth and employment”, Robert Pollin et al. (Political Economy Research Institute 2009). See also “Climate Change Policy as an Economic Redevelopment Opportunity: The Role of Productive Investments in Mitigating Greenhouse Gas Emissions”, John Laitner (ACEEE 2009). The case that carbon legislation can help end the recession is made by Economics Nobel Prize winner Paul Krugman, “An Affordable Salvation”, New York Times, April 30, 2009. Senator Byrd’s speech “Coal Must Embrace the Future” (December 3, 2009) can be found at http://byrd.senate.gov.

Related Posts:

• Introduction to climate economics: Why even strong climate action has such a low total cost — one tenth of a penny on the dollar
• New analysis shows how clean energy legislation will create 1.7 million jobs and opportunities for low-income families, including lower energy bills

UPDATE:  SEC has put out a Press Release (and a video of the Chair’s statement).

In a 3-to-2 vote, the U.S. Securities and Exchange Commission determined today that companies “must consider the effects of global warming and efforts to curb climate change when disclosing business risks to investors.”

Guidelines approved today require companies to weigh the impact of climate-change laws and regulations when assessing what information to disclose, the commission said. The SEC is responding to investors who said companies aren’t providing enough data on the potential risks to their profits and operations from environmental- protection laws. In the 3-to-2 vote, the commission said companies in the U.S. should also consider international accords, indirect effects such as lower demand for goods that produce greenhouse gases, and physical impacts such as the potential for increased insurance claims in coastal regions as a result of rising sea levels.

Ceres, a network of investors and climate activists, hailed the action as “the first economy-wide climate risk disclosure requirement in the world.” More than a dozen investors managing over $1 trillion in assets, plus Ceres and the Environmental Defense Fund, requested formal guidance in a petition filed with the Commission in 2007, and supported by supplemental petitions filed in 2008 and 2009.

For too long, the reality of climate change has been ignored by American business, exemplified by the U.S. Chamber of Commerce’s denial of global warming. This willful ignorance has left American business — from agriculture to the financial sector — unprepared for the increasing damages of climate change, such as sea level rise, drought and wildfires. Furthermore, these blinders have kept American business behind international competitors, who have leapt ahead by investing in the coming low-carbon economy.

JR:  Business Week reports that anti-science still rules with the minority:

The commission voted along party lines with two Republicans, Kathleen Casey and Troy Paredes, rejecting the proposal. Both said scientific claims that man-made emissions are contributing to global warming are “unsettled” and today’s move could swamp investors with unnecessary information.

Sad.  Yes, wouldn’t want to swamp those investors with unnecessary information.  That’s what conservatives do — they protect the people from unnecessary information.  Thank goodness we didn’t swamp investors with information about risks pertaining to mortgage-backed securities and credit default swaps a few years ago.  Who knows what bad decisions they might have made with all that unnecessary information.

The SEC PR:

SEC Issues Interpretive Guidance on Disclosure Related to Business or Legal Developments Regarding Climate Change

Washington, D.C., Jan. 27, 2010 — The Securities and Exchange Commission today voted to provide public companies with interpretive guidance on existing SEC disclosure requirements as they apply to business or legal developments relating to the issue of climate change.

Federal securities laws and SEC regulations require certain disclosures by public companies for the benefit of investors. Occasionally, to assist those who provide such disclosures, the Commission provides guidance on how to interpret the disclosure rules on topics of interest to the business and investment communities. The Commission’s interpretive releases do not create new legal requirements nor modify existing ones, but are intended to provide clarity and enhance consistency for public companies and their investors.

The interpretive release approved today provides guidance on certain existing disclosure rules that may require a company to disclose the impact that business or legal developments related to climate change may have on its business. The relevant rules cover a company’s risk factors, business description, legal proceedings, and management discussion and analysis.

“We are not opining on whether the world’s climate is changing, at what pace it might be changing, or due to what causes. Nothing that the Commission does today should be construed as weighing in on those topics,” said SEC Chairman Mary Schapiro. “Today’s guidance will help to ensure that our disclosure rules are consistently applied.”

Specifically, the SEC’s interpretative guidance highlights the following areas as examples of where climate change may trigger disclosure requirements:

• Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.
• Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
• Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.
• Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

* * *

The SEC’s interpretive release will be posted on the SEC Web site as soon as possible.

Climate change is a fact, and it is almost entirely made by man. It is jointly responsible for the rise in severe weather-related natural disasters, since the weather machine is “running in top gear”. The figures speak for themselves: according to data gathered by Munich Re, weather-related natural catastrophes have produced US$ 1,600bn in total losses since 1980, and climate change is definitely a significant contributing factor. We assume that the annual loss amount attributable to climate change is already in the low double-digit billion euro range. And the figure is bound to rise dramatically in future.

Those are the words of the CEO of Munich Re, the world’s largest reinsurer, in December.  The anti-science crowd tries to shout down any talk of a link between climate change and extreme weather but even the loudest shouter told the journal Nature back in 2006, “Clearly since 1970 climate change (i.e., defined as by the IPCC to include all sources of change) has shaped the disaster loss record.”  Indeed, that Nature article reported four years ago:

At a recent meeting of climate and insurance experts, delegates reached a cautious consensus: climate change is helping to drive the upward trend in catastrophes.

The evidence has only gotten stronger in recent years.  A major study published in 2009, “Tropical cyclone losses in the USA and the impact of climate change — A trend analysis based on data from a new approach to adjusting storm losses” concluded:

In the period 1971–2005, since the beginning of a trend towards increased intense cyclone activity, losses excluding socio-economic effects show an annual increase of 4% per annum. This increase must therefore be at least due to the impact of natural climate variability but, more likely than not, also due to anthropogenic forcings.

A 2009 NOAA-led report, Global Climate Change Impacts in the United States, identified a number of climate-related impacts that are occurring now and expected to increase in the future that could shape the disaster loss record:

Many phony charges are now being leveled at the IPCC because the anti-science crowd smells blood in the water, and many “journalists” are ready to repeat their nonsense (see “EXCLUSIVE: UN scientist refutes Daily Mail claim he said Himalayan glacier error was politically motivated.”

The newest phony charge came Sunday from another dubious source in the British press, “UN wrongly linked global warming to natural disasters.”   But on Monday, the IPCC slammed the story as “misleading and baseless.”  As the “IPCC statement on trends in disaster losses” explains:

The Sunday Times article gets the story wrong on two key points. The first is that it incorrectly assumes that a brief section on trends in economic losses from climate-related disasters is everything the IPCC Fourth Assessment Report (2007) has to say about changes in extremes and disasters. In fact, the Fourth Assessment Report reaches many important conclusions, at many locations in the report, about the role of climate change in extreme events. The assessment addresses both observations of past changes and projections of future changes in sectors ranging from heat waves and precipitation to wildfires. Each of these is a careful assessment of the available evidence, with a thorough consideration of the confidence with which each conclusion can be drawn.

The second problem with the article in the Sunday Times is its baseless attack on the section of the report on trends in economic losses from disasters. This section of the IPCC report is a balanced treatment of a complicated and important issue. It clearly makes the point that one study detected an increase in economic losses, corrected for values at risk, but that other studies have not detected such a trend. The tone is balanced, and the section contains many important qualifiers. In writing, reviewing, and editing this section, IPCC procedures were carefully followed to produce the policy-relevant assessment that is the IPCC mandate.

Kudos to the IPCC for responding to a trumped up charged quickly for once!

Chart: Climate-risk disclosure trends among U.S.- and non-U.S.-based insurance companies (Source: CDP data per Mills 2009)

Coincidentally, I already had a guest post in the works from one of the country’s leading experts on the connection between climate change and extreme weather and the impact on the insurance  industry, Evan Mills.  So, the rest of this post is Mills, a scientist at the Lawrence Berkeley National Laboratory, whom I have known for almost two decades.  He is a true polymath (see “Building Commissioning: The Stealth Energy Efficiency Strategy“):

I had the pleasure of keynoting a meeting on climate change convened last month in San Francisco by the National Association of Insurance Commissioners (NAIC), the American Insurance Association (AIA), the Reinsurance Association of America (RAA), and Ceres. The speaker line-up included Fireman’s Fund, Prudential Capital Group, Deutsche Asset Management, CalPERS, Willis Re, Zurich Financial Services,Wells Fargo, NOAA’s National Climatic Data Center, NRDC, the California Department of Insurance, and several catastrophe modeling and environmental consultants.  All spoke in unison about the risks and opportunities of climate change and the role that insurers and their regulators are increasingly playing in responding to it.

I argued in my presentation that climate change is the single greatest risk facing the insurance industry.  Ernst & Young’s survey of 70 industry analysts seems to agree with me. As I’ve explained in Science, climate change is a systemic risk not unlike the banking crisis that blindsided almost everyone thanks in no small part to a nasty cocktail of undisclosed risks and wishful thinking. Astute insurers recognize a panoply of potential correlated losses triggered by climate change spanning the core business of underwriting (in almost every line of business, from property to life/health to liability), coupled with exposures through the assets in which they invest, topped off with with formidable collatoral reputational, regulatory, and competitive risks. A vanguard of insurers are responding with new products, services, and constructive engagement in public policy.

I also pointed out that insurer shareholders have emerged in force, most notably through the Carbon Disclosure Project (CDP), with members representing $55 trillion under management. Now, U.S. insurance regulators are asking insurers to proactively disclose their climate-risk assessment for the benefit of shareholders, customers, and, yes, even the insurers themselves.

During the Q&A period, Robert Detlefsen, from the National Association of Mutual Insurance Companies (NAMIC), asked to share a “comment” (which he emphasized was not a question) about my presentation. Detlefsen–formerly with Citizens for a Sound Economy and the Competitive Enterprise Institute–was displeased that I had not given more attention to the infamous CRU emails.  I responded that I would be delighted to discuss the subject with him at length after the session. He elected not to take me up on this offer.

Pseudoscience appears to be more compelling to some than fact-based science or the pursuit of genuine understanding. Insurance based on pseudoscience risks deteriorating into pseudoinsurance.

A peculiar article by Evan Lehmann in the New York Times dredges up the stale CRU story (which has otherwise fizzled for lack of substance) and features Detlefsen’s distrust of science and distaste for climate risk disclosure, as summarized in a letter to his members’ regulators reiterating his concerns.

To the uninitiated reader, Lehmann’s piece might suggest that the entire insurance industry is questioning the veracity of climate science or the value of risk disclosure.  What readers are left on their own to discover is that NAMIC–the trade organization featured as skeptical on climate change–“represents” but one branch of the industry (the mutual insurers).  Two other insurance trade associations (AIA and RAA) not only co-hosted the summit but were actually on stage that day advancing a constructive discussion about how to get in front of the problem. Readers would also not have suspected that Detlefsen’s own organization sends a very different message through its excellent web portal on climate and insurance. Ironically, the insurance trade press has thus far given far more balanced treatment to these issues.

While Detlefsen characterizes the motivation of others in seeking climate-risk disclosure to regulators, shareholders, and customers as having “nakedly ideological ends,” over 100 insurance companies (approaching 70% of those asked) have somehow seen their way to replying to a voluntary climate risk disclosure process that has been conducted for years through CDP. They frequently find that the very process of assembling climate-disclosure documentation is constructive (not just a compliance exercise) and helps them think through the issues and better assess their risk and their progress towards managing that risk. Other U.S. insurance trade organizations have worked collaboratively to help craft the U.S. disclosure process. One of them, the American Insurance Association, is noted as being far more at peace with the regulators’ climate disclosure efforts than is NAMIC. Any observer would have to read quite a lot between the lines to support Detelfsen’s stipulation that that the regulators have any pre-determined expectations about the conclusions that insurers’ will reach through the disclosure process.

Climate skepticism among insurance trade associations like NAMIC is a more or less uniquely American phenomenon. Even then, some of NAMICs largest members—including household names like State Farm, Nationwide and Liberty Mutual —have been accepting of the science and very proactive in identifying responses to climate-change risks.  To my knowledge, none have retracted their previous statements based on the stolen emails.

Other U.S. insurance tradegroups do not share Detlefsen’s perspective. The Reinsurance Association of America engaged in the climate discussion 15 years ago, and recently issued a constructive and proactive climate change policy statement.  The American Insurance Association has also been engaged for over a decade, including participation in international fora. The Association of Bermuda Insurers and Reinsurers issued a policy statement just before the Copenhagen meeting. These trade associations seem to believe that it is not only appropriate but also beneficial for themselves and the companies they represent to engage.

Although invoked by Detlefsen as a reason to scuttle the disclosure process, the “tempest in a thimble” brought on by the stolen emails has been debunked ad nauseum, including in a systematic third-party review by the Associated Press.  [I cite the AP review only for those readers who don’t want to trust the scientific establishment for policing itself and reviewing the CRU issue formally.] Any substance that may remain does not change our fundamental scientific understanding of climate change. What Detlefsen desribes in his letter as my “intolerance for dissent” in finding no smoking gun in these emails, is more accurately characterized as my desire (and responsibility as a practicing scientist) to keep science fact-based. The factual inaccuracies that underpin the critics’ interpretation of these emails suggest either a very human tendancy to explain away bad news, profound technical incompetence, or sheer desperation in trying to delay addressing the risks. The interests of society (including those of insurers) are poorly served by sensationalized (and often non-fact-checked) reporting on peer-reviewed science. I would only add that questioning the findings of climate science based on non-expert interpretations of these emails is tantamount to discarding the very practice of scientific inquiry, while dismissing the judgment of hundreds of governments, business groups, and religious organizations that have scrutinized and accepted what mainstream science (and the Nobel Prize committee) has concluded about climate change since inquiry began over a century ago.  From the Pentagon to the Supreme Court to the Vatican – human-induced climate change is accepted fact. This leaves precious little for holdouts to hang their hats on.

Chart: Climategate plot from Google/trends (Source: http://www.google.com/trends)

Many insurance companies can’t be bothered with foot-dragging. Through 2008, we documented nearly 643 specific activities on the part of 246 insurance entities from 29 countries (as well as 34 non-insurer collaborators). This represented a 50% year-over-year increase in the level of activity compared to that observed through 2007. These entities collectively earned $1.2 trillion in annual premiums that year (more than a quarter of the global total) and had $13 trillion in assets, while employing 2.2 million people.

Exasperated with the outcome in Copenhagen last month, the CEO of Munich Re (the world’s largest and most science-focused reinsurer) stated that:

“Climate change is a fact, and it is almost entirely made by man. It is jointly responsible for the rise in severe weather-related natural disasters, since the weather machine is “running in top gear”. The figures speak for themselves: according to data gathered by Munich Re, weather-related natural catastrophes have produced US$ 1,600bn in total losses since 1980, and climate change is definitely a significant contributing factor. We assume that the annual loss amount attributable to climate change is already in the low double-digit billion euro range. And the figure is bound to rise dramatically in future.”

To probe the internal consistency of Detlefsen’s hypothesis for a moment, even if climate change may not be happening, isn’t risk a product of uncertainty, and don’t insurers repeatedly tell us that “risk is our business”? And doesn’t selectively feeding on newspaper soundbites instead of thousands of peer-reviewed technical articles for climate intelligence invite myopia and risks of its own?  Regulators—and insurance customers—expect a far higher level of due diligence. This is summed up well in a leading actuarial journal by the former corporate actuary and vice president of risk management for Nationwide Insurance — one of NAMIC’s largest members — and current chair of the Casualty Actuarial Society’s Climate Change Committee:

“For anyone attempting to move through the informational confusion on climate-change issues, the proliferation of counterfactual information makes the task daunting. Though the vast majority of climatologists support the global-warming theory, much of the media coverage gives approximately equal weight to the proponents of each side of the debate. … We need to recognize the likelihood that some climate changes are probable rather than improbable.”

Pretzel logic aside, foreword-looking insurers are adapting to a host of risks and opportunities.  Technology and business practices are changing as fast as fast as the climate itself. This is already reshaping the demand for insurance.  New risks will arise, e.g. those associated with carbon capture and storage, a revival of nuclear power, and geoengineering. Insurers that ignore this transition do so at their peril.

– Evan Mills

JR:  Here are some related posts:

• Australian Scientists: “there are indications that climate change has worsened this recent drought.”
• The non-blizzard of 2009 and why the anti-science disinformers try to shout down any talk of a link between climate change and extreme weather

We may look back upon Copenhagen as an important moment — both because global leaders took the reins of the procedures and brought the negotiations to a fruitful conclusion, and because the foundation was laid for a broad-based coalition of the willing to address effectively the threat of global climate change.  Only time will tell.

This guest post by Robert Stavins, Director of the Harvard Environmental Economics Program, was first published here.

After years of preparation, the Fifteenth Conference of the Parties (COP-15) of the United Nations Framework Convention on Climate Change (UNFCCC) commenced on December 7^th, 2009, and adjourned some two weeks later on December 19^th after a raucous all-night session.  The original purpose of the conference had been to complete negotiations on a new international agreement on climate change to come into force when the Kyoto Protocol’s first commitment period comes to an end in 2012.  But for at least the past six months, it had become clear to virtually all participants that such a goal was out of reach — and the COP-15 objective was publically downgraded in mid-November to a non-binding agreement by heads of state at a meeting in Singapore of the Asia-Pacific Economic Conference.

I begin by describing what were reasonable expectations going into the Copenhagen negotiations and appropriate definitions of success for COP-15, and then turn to the unprecedented process which unfolded over the final 36 hours of the conference.  Next, I describe the fundamental architecture of the sole product that emerged – the Copenhagen Accord – and describe its key provisions, with an assessment of each component.  I close with an examination of the major pending issues and the available procedural routes ahead.

Sensible Expectations and Definitions of Success for Copenhagen

There was much hand-wringing in the months leading up to COP-15 about how difficult the negotiations had become.  I saw this as something of “A Silver Lining in the Climate Talks Cloud,” because the difficulty was largely a consequence of key countries of the world taking very seriously the task of expanding the coalition of the willing.

Going into Copenhagen, the challenge was very great, largely because of fundamental economic (and hence political) realities, as I explained in a previous post, “Chaos and Uncertainty in Copenhagen?” Given legitimate concerns about issues of efficiency, on the one hand, and distributional equity, on the other hand, it was not surprising that the industrialized countries (particularly the United States) insisted that China and other key emerging economies participate in a future agreement in meaningful and transparent ways, nor that the developing countries insisted that the industrialized countries foot much of the bill.

The key question was whether the negotiators in Copenhagen could identify a policy architecture that is both reasonably cost-effective and sufficiently equitable to generate support from the key countries of the world, and thus do something truly meaningful about the long-term path of global greenhouse gas emissions.  There were (and are) some promising paths forward, as we have documented in the Harvard Project on International Climate Agreements, and as we examine in a pair of current books (Post-Kyoto International Climate Policy: Summary for Policymakers; and Post-Kyoto International Climate Policy:  Implementing Architectures for Agreement).

At the final hour in Copenhagen, the leaders of a small number of key countries worked creatively together to identify a politically feasible path forward.  I have previously argued (“Defining Success for Climate Negotiations in Copenhagen”) that the best goal for the Copenhagen climate talks was to make progress on a sound foundation for meaningful, long-term global action, not some notion of immediate, numerical triumph.  That has essentially been accomplished with the “Copenhagen Accord,” despite its flaws and despite overt challenges from five of some 193 countries represented (Bolivia, Cuba, Nicaragua, Sudan, and Venezuela).

An Unprecedented Process

Before turning to the substance of the Copenhagen Accord, it is worthwhile taking note of the quite remarkable process that led up to its “last-minute” creation.  From all reports, the talks were completely deadlocked when U.S. President Barak Obama arrived on the scene at 8:00 am on Friday, December 18^th, the scheduled final day of the conference.  Through a series of bilateral and eventually multilateral meetings of President Obama with Chinese Premier Wen Jiabao, Indian Prime Minister Manmohan Singh, Brazilian President Luiz Inacio Lula da Silva, and South African President Jacob Zuma, a document gradually emerged which was to become the Copenhagen Accord.

It is virtually unprecedented in international negotiations for heads of government (or heads of state) to be directly engaged in, let alone lead, negotiations, but that is what transpired in Copenhagen.  Although the outcome is less than many people had hoped for, and is less than some people may have expected when the Copenhagen conference commenced, it is surely better – much better – than what most people anticipated just three days earlier, when the talks were hopelessly deadlocked.

The Copenhagen Accord – Its Fundamental Architecture

The fundamental architecture of the Copenhagen Accord is one we recently analyzed in the Harvard Project on International Climate Agreements in “A Portfolio of Domestic Commitments: Implementing Common but Differentiated Responsibilities,” and about which I blogged at the end of November (Approaching Copenhagen with a Portfolio of Domestic Commitments).  Essentially, under such an approach each nation commits and registers to abide by its domestic climate commitments, whether those are in the form of laws and regulations or multi-year development plans.  This is essentially the “schedule approach” introduced by the Australian government in spring 2009.

After its release, President Obama characterized the new Accord as “an important first step” at his press conference shortly before returning to Washington.  I would prefer to amend that characterization to call the Accord a potentially very important third step.  Step One was the UN Earth Summit in Rio de Janeiro in 1992, which produced the U.N. Framework Convention on Climate Change.  Step Two was the Kyoto Protocol, signed in Japan in 1997.  But what many policy wonks (myself included), not to mention the United States Senate, immediately recognized was the absence from the Kyoto Protocol of involvement in truly meaningful ways of the key, rapidly-growing developing countries, a small set of important nations that are now better termed “emerging economies” – China, India, Brazil, South Africa, Mexico, and Korea.  This was a primary deficiency of Step Two, as well as the lack of serious attention to the long-term path of emissions (as opposed to the five-year time horizon of Kyoto).

The Copenhagen Accord establishes a framework for addressing both deficiencies, and thereby can be characterized as a potentially very important third step – expanding the coalition of the willing and extending the time-frame of action.  With this step, all of the seventeen countries of the Major Economies Forum– which together account for some 90% of global emissions – are agreeing to participate.  Nevertheless, let’s be honest about the difference between the outcome of the 1997 negotiations in Kyoto (a detailed 20-page legal document, the Kyoto Protocol) and the outcome of the 2009 negotiations in Copenhagen (a general 3-page political statement, the Copenhagen Accord).  Still, it remains true that the COP-15 negotiations were “saved from utter collapse” by the creation and acceptance of the Copenhagen Accord.

The Copenhagen Accord – Key Provisions and Preliminary Assessment

It is unquestionably the case that the Accord represents the best agreement that could be achieved in Copenhagen, given the political forces at play.  Indeed, were it not for the spirited – and as I suggested above, quite remarkable – direct intervention by President Obama, together with the other key national leaders, there would have been no real outcome from the Copenhagen negotiations.  That said, let’s take a critical look at the Accord, item by item.  The key provisions (as I interpret them, with my own numbering, not that of the Accord) are these:

1.      The signatories validate their will to “urgently combat climate change in accordance with the principle of common but differentiated responsibilities and respective capabilities.”  The signatories agree that deep cuts in global emissions are required to hold global temperature increases to 2 degrees Centigrade, and commit to take actions to meet this objective, “consistent with science and on the basis of equity.”

Assessment: Although the Accord notes the importance of the frequently-discussed 2 degrees Centigrade target, it does not spell out actions that will achieve it.  The Accord also notes the importance of the principle of “common but differentiated responsibilities,” which is of great importance to developing countries.

2.      Action and cooperation on adaptation is urgently required, particularly in the least developed countries, small island developing states, and Africa.  Developed countries commit to provide financial resources to support adaptation measures in developing countries.

Assessment: Recognizing the importance of adaptation and providing financial resources to support it in developing countries is an important departure from Kyoto.  Targeting the funds to the “least developed countries” is sensible.

3.      Annex I Parties of the Kyoto Protocol (the 1997 list of the industrialized countries and the emerging market economies of Central and Eastern Europe) commit to implement mitigation actions (specified in Appendix I), and Non-Annex I Parties (the developing world, as defined in the Kyoto Protocol) also commit to implement mitigation actions (specified in Appendix II), all of which will be submitted to the UNFCCC Secretariat by January 31, 2010.

Assessment: These appendices (“schedules”) of domestic mitigation targets, actions, and policies are the heart of the Portfolio approach, as I described above.  This is where the action is.

It is unfortunate (but was probably politically necessary) that the Accord maintains the distinction of Annex I versus non-Annex I countries from the Kyoto Protocol.  I have characterized this distinction in the Kyoto Protocol as the “QWERTY keyboard” (unproductive path dependence) of international climate policy, because it has been the greatest impediment to developing a meaningful international arrangement.  It is because of the presence of this distinction that developing countries have insisted on a continuation of the Kyoto Protocol for a second (post-2012) commitment period.

Note that even if the Annex I list was appropriate in 1997, it surely no longer is:  more than 60 non-Annex I countries now have greater per capita income than the poorest of the Annex I countries.

An important improvement would be to employ a formulaic mechanism that takes a variety of factors into account, including per capita income, to determine the stringency of ambition, targets, or actions for individual countries, rather than the dichotomous distinction of having targets or not (“Global Climate Policy Architecture and Political Feasibility: Specific Formulas and Emission Targets to Attain 460 PPM CO2 Concentrations”).

If a continuous spectrum with all countries listed in the same table is not politically feasible, then a mechanism is needed for countries to transition from one list to the other.  Korea and Mexico joined the OECD six months after Kyoto, but they remain off the Annex I list.

4.      Emissions reductions for the Annex I parties will be measured, reported, and verified according to guidelines (to be established), which will be rigorous and transparent, whereas mitigation actions taken by non-Annex I parties will be subject to domestic measurement, reporting, and verification (MRV) reported through national communications, with international consultation and analysis.

Assessment: There was a great deal of attention to this issue in Copenhagen, with all members of the U.S. delegation talking about the importance of “transparency.”  The compromise seems acceptable:  developing countries employ domestic measurement, reporting, and verification, but it is subject to “international consultation and analysis.”

Interestingly, the Accord is silent on the issue of “international competitiveness” and the possible use of border adjustments (border taxes or import allowance requirements in national cap-and-trade systems).  This is a controversial point, since inclusion of such mechanisms is important in domestic U.S. politics, but is anathema to China, India, and other developing countries.

5.      Least developed countries and small island developing states may undertake actions voluntarily and on the basis of support (from other countries).  Such actions will be subject to international measurement, reporting, and verification.

Assessment: This is the third element of the national schedules, reserved for the poorest developing countries (which contribute only trivially to greenhouse gas emissions), and it seems acceptable, although a graduation mechanism would again be desirable.  Interestingly, if their actions are funded by developed countries, then those actions are subject to the most stringent MRV.  So-called technology transfer mechanisms are included in this context.

6.      The parties will establish positive incentives to stimulate financial resources from developed countries to help reduce emissions from deforestation and degradation.

Assessment: This is a potentially important change, as the lack of meaningful attention to retarding deforestation was a significant deficiency of the Kyoto Protocol.  We have investigated appropriate mechanisms in the Harvard Project on International Climate Agreements (“International Forest Carbon Sequestration in a Post-Kyoto Agreement”).

7.      The parties agree to pursue opportunities to use markets to achieve cost-effective mitigation actions.

Assessment: As we have documented in the Harvard Project (“Linkage of Tradable Permit Systems in International Climate Policy Architecture”), it is very important that future international agreements facilitate or at least not discourage voluntary linkage of national and multi-national cap-and-trade systems.  Needless to say, this provision in the Accord – like virtually all of the provisions – will require specific details to make it operational.

8.      Predictable and adequate funding will be provided to developing countries for emissions mitigation, reduction of deforestation, and adaptation.  There is a collective commitment from developed countries “approaching” $30 billion for the period 2010-2012, “balanced between adaptation and mitigation,” with adaptation funding being prioritized for the most vulnerable developing countries.

Assessment: To whatever degree the funding for mitigation is of government-government form (expanded foreign aid), legitimate concerns exist about both the feasibility of marshalling the necessary amounts and the efficiency of its use.  The private sector needs to be employed, as I have previously argued (“Only Private Sector Can Meet Finance Needs of Developing Countries”).

A preliminary Copenhagen Accord document indicated a U.S. pledge of $3.6 billion for this period, along with pledges of $10.6 billion from the European Community, and $11 billion from Japan.  Fulfillment of the U.S. pledge would be contingent on Congressional action.

9.      The developed countries commit to a goal of jointly mobilizing $100 billion annually by 2020 from sources both public and private.

Assessment: It is important that the Accord notes that the funds can come from either public or private sources.  Governments can — through the right domestic and international policy arrangements — provide key incentives for the private sector to provide the needed finance through foreign direct investments for emissions mitigation (clearly a role exists for government assistance for adaptation).  For example, if the cap-and-trade systems which are emerging throughout the industrialized world as the favored domestic approach to reducing CO₂ and other greenhouse gas emissions are linked together through the existing, common emission-reduction-credit system, namely the Clean Development Mechanism (CDM), then powerful incentives can be created for carbon-friendly private investment in the developing world.

Clearly the CDM, as it currently stands, cannot live up to this promise, but with appropriate reforms there is significant potential.  Of course, problems of limited additionality will inevitably remain.  Therefore, what is needed is for the key emerging economies to take on meaningful emission targets themselves (even if equivalent to business as usual in the short term), and then participate directly in international cap-and-trade, not government-government trading as envisioned in Article 17 of the Kyoto Protocol (which will not work), but firm-firm trading through linked national and multi-national cap-and-trade systems.

Such private finance stands a much greater chance than government aid of being efficiently employed, that is, targeted to reducing emissions, rather than spent by poor nations on other (possibly meritorious) purposes.

10.  Evaluation of the Accord’s implementation is to be completed by 2015, including consideration of strengthening the long-term goal as the science indicates.

Assessment: Depending upon when the Accord is implemented, completing an assessment by 2015 might or might not be reasonable.  A provision to strengthen the long-term goals of the Accord may be sensible, but it would seem that the provision should provide more generally that the long-term goal should be “adjusted as the science indicates,” so as not to pre-judge what future scientific research may reveal.

11.  In the official version of the Accord released by the UNFCCC, Appendix I (quantified 2020 economy-wide emissions targets for Annex I countries) and Appendix II (nationally appropriate mitigation actions of developing country parties) are blank, but an earlier version obtained by the Wall Street Journal includes three detailed tables of information:  specific numerical pledges for emissions reductions made by Annex I parties; specific numerical voluntary mitigation pledges of developing country parties; and specific numerical pledges by developed country parties for financial resources for the period 2010-2012.

Assessment: It is unfortunate that the completed tables were not included in the version officially released by the UNFCCC Secretariat.  On the one hand, those tables make clear that the Accord will not – as the current pledges stand – achieve a target of limiting concentrations of greenhouse gases to 450 ppm of CO₂ –equivalent, which is what many observers wanted.  On the other hand, the specificity of the tables – both the numerical pledges from 15 Annex I countries plus the European Union (EU-27) and the “voluntary pledges” of 11 developing countries, including Brazil, China, India, Indonesia, Mexico, Korea, and South Africa, would have exhibited the compelling substance of the Accord, and would have given the agreement greater credibility, at least in news media reports.  Furthermore, the numbers are surely meaningful as a launching point for further negotiations.

The Way Forward

Many details regarding these elements of the Accord as well as other unspecified issues remain on the table, and will presumably be examined and negotiated if nations move forward with the Copenhagen Accord and the basic architecture it promulgates.  We are already at work on many of these issues in the Harvard Project on International Climate Agreements, including:

·         metrics for evaluating commitments

·         climate policy review mechanisms

·         compliance mechanisms

·         afforestation and deforestation mechanisms

·         facilitating international market linkage

·         fostering technology transfer

·         methods of negotiating and updating climate agreements

·         methods of providing incentives for developing country participation

·         methods of carbon finance

·         making an international climate agreement consistent with international trade rules

Whether the next step in international deliberations should be under the auspices of the UNFCCC or a smaller deliberative body, such as the Major Economies Forum (MEF), is an important question.  Given the necessity of achieving consensus (that is, unanimity) in United Nations processes and the open hostility of a small set of nations, bilateral and multilateral discussions, including via the MEF, could be an increasingly attractive route, at least over the short term.

The climate change policy process is best viewed as a marathon, not a sprint.  The Copenhagen Accord – depending upon details yet to be worked out – could well turn out to be a sound foundation for a Portfolio of Domestic Commitments, which could be an effective bridge to a longer-term arrangement among the countries of the world.  We may look back upon Copenhagen as an important moment – both because global leaders took the reins of the procedures and brought the negotiations to a fruitful conclusion, and because the foundation was laid for a broad-based coalition of the willing to address effectively the threat of global climate change.  Only time will tell.

– Robert Stavins

Other posts by Stavins on CP:

• Stavins: “The appropriate characterization of the Waxman-Markey allocation is that more than 80% of the value of allowances go to consumers and public purposes, and less than 20% to private industry.”
• Confusion in Senate regarding allowance allocation
  

Guest blogger Paulina Essunger is a freelance science writer.

One year ago, the far-right, anti-science* Danish People’s Party (DPP) (cue Sheb Wooley) requested that the annual earmarks for the controversial think tank, the Copenhagen Consensus Center (CCC), be tripled in the year leading up to the top climate meeting, COP-15.

The Liberal-Conservative minority administration chose to compromise on this issue, and the 2009 budget ended up containing DEK 7.5 million for the think tank run by the notorious climate contrarian Bjørn Lomborg. This year, Lomborg once again got to be, as one member of parliament put it, “the dunce’s hat that the DPP makes the Conservatives, wear, year after year, during budget negotiations.” In the budget finalized last month, Lomborg upped his previously scheduled earmarks, for a total of DEK 18 million over the next four years.

Last year’s decision was hotly contested by the opposition parties, prompting a special session in which then-Climate and Energy Minister Connie Hedegaard was asked why the government wanted to focus attention on Lomborg, of all people, and fund his projects, in conjunction with COP-15. As bizarre as last year’s decision was, last month’s decision is even harder to understand. (Until this morning, Wednesday, December 16,Hedegaard was president of COP-15; last month, she was named European Commissioner for Climate Action.)

The extra money allocated in last year’s agreement was tied to a particular assignment. The administration claimed that the specifications for this assignment would prevent Lomborg from assuming his trademark position, namely to argue that the global community should focus on other problems, not global climate disruption. Whether the administration really thought Lomborg’s work would be of value or the assignment specifications were just a face-saving feature is not obvious.

The budget agreement for 2009 directed CCC to consider alternatives for dealing with climate change, not–as is Lomborg’s wont–to propose alternatives to dealing with climate change. This certainly seems more reasonable than simply paying Lomborg to undermine the official government efforts with respect to COP-15 in any way he might see fit.

But that’s not saying much. Indeed, last year, Ida Auken, climate spokesperson for the Socialist People’s Party, compared asking Lomborg to conduct this analysis to asking an anti-regulation think tank to analyze how best to regulate financial markets. A bit like asking the boogeyman to babysit your children. This time around, when the new budget agreement was reached, with no pro-climate strings whatsoever attached to Lomborg’s earmarks, Auken tweeted: “18 million more to Lomborg in the budget. V and K [the administration parties] protest. Who’s running this nation, anyway?”

In November 2008, the budget agreement specified (pdf) what the additional 200 percent be used for:

[The project objective] is to clarify possible solutions to the climate challenges ahead of the climate conference. The project aims to clarify benefits and costs of different possible solution models in conjunction with an international treaty.

In the special session last November, Hedegaard explained:

“Lomborg’s [new] assignment is not to say anything about whether the climate issue should or shouldn’t be prioritized.

The budget agreement actually specifies precisely…what is supposed to come [from the extra funding]. It says that the project aims to clarify benefits and costs of various possible solution models in conjunction with an international climate treaty. It’s there in black and white, actually, what the assignment asks Bjørn Lomborg and his center to weigh in on.

So, he’s supposed to do something a bit different from what he usually does, because in this case he’s directed to consider the entirely concrete solution models that are on the table in the climate negotiations. And then he can’t say that it’s better to do all kinds of other things. The assignment is to work with entirely concrete models, that are already on the table, and tell us what the impact of these may be, and what the costs of these may be.”

The project specifications, and the way Hedegaard presented these in the special session, certainly suggest an attempt to put the best possible face on the head wearing the dunce’s hat. More from Hedegaard:

“It’s of considerable importance whether the administration has asked Bjørn Lomborg to offer what he is wont to offer, namely that we really should be prioritizing everything else rather than fight climate change. That’s what we’ve heard so far from Copenhagen Consensus. But even so, that’s not what Bjørn Lomborg is supposed to weigh in on now. He is supposed to estimate costs, and as far as that goes, I think they’re pretty clear on that themselves over at Copenhagen Consensus, because I read in the [Special Magazines' Press Agency newsletter] today that they are going to perform economic analyses of the solutions that are on the table and consider what it [sic] will cost and and how much it will contribute to solving the problem. We do not in any way take a position on whether the one or the other is good or bad, and what the politicians should implement or not, they said. So, to that extent, it’s a pretty clear message.”

Hedegaard was referring to an interview with the CCC project manager, Tommy Petersen in which he did say:

“We do not in any way take a position on whether the one or the other is good or bad, and what the politicians should implement or not.”

(Courtesy of Special Magazines’ Press Agency, November 18, 2008)

Apparently, the CCC web designer did not get the memo:

The website also explains:

The Copenhagen Consensus Center is a think-tank based in Denmark that tells governments and philanthropists around the world about the best ways to spend aid and development money.
We commission research that analyzes the optimal ways to combat the biggest problems facing the world.
We promote the use of sound economic science – especially the principle of prioritization – to make sure that with limited resources, we achieve the most ‘good’ for people and the planet.

This confusion, if that’s the right word, about what the think tank would and wouldn’t do is a loss of face for the administration. To add insult to injury, this time around no good face, let alone best face, can be put on the decision–no special specifications meant to serve as a straitjacket for Lomborg’s “deliberate deception”** were provided this time, just money for the center and its regular projects.

It is hard to understand how the Danish government, with just a few weeks to go to COP-15 (now, at the half-way mark), with the eyes of the world focusing in on the small, flat nation, could possibly have chosen to compromise in this particular area, could have chosen to throw even more money at Lomborg than they had already committed. Administration party officials were calling for an audit of Lomborg’s center, saying that he is an entertainer, a performer, not a researcher; the climate spokesperson for the Prime Minister’s own party, had proposed, with thinly veiled sarcasm: “We should consider a cost-benefit analysis to see whether we get the greatest environmental benefit by giving the money to Lomborg’s center.” And, most jarringly, the hotly contested extra money for the COP-15 project had ended up funding a recommendation that we prioritize geoengineering solutions.

It is unclear if Hedegaard’s expectations for the Copenhagen Consensus Center COP15 Initiative have been met. What “solution-models” did she have in mind, when she claimed Lomborg would look at those that were “already on the table”? How do the “solutions” Lomborg focused on relate to those in the real world, at stake in Copenhagen today? (The minister’s own office did not offer a response to our question of what solutions or kinds of solutions Hedegaard believed were “on the table” in November 2008, instead directing us to the ministry which handles Lomborg’s funding.)

The general Copenhagen Consensus methodologies have been criticized at length. Above we saw how Hedegaard exasperatedly characterized Lomborg’s standard position to be to conclude that “we really should be prioritizing everything else rather than fight climate change.” Among the critics are also some of the projects’ own expert solution-report authors and some of the top economists doing the notorious “ranking.” The charge of “deliberate deception” mentioned above comes from a group of these authors, including Gary Yohe, an economist at Wesleyan University. Following the release of Lomborg’s COP-15 project results this past summer, Yohe wrote an op-ed for the Danish publication Information.dk (English language version courtesy of Yohe):

Negotiators who will converge on Copenhagen in December surely understand that we need a portfolio of policies informed by decision-support techniques that recognize risk. I expect that they understand that, in particular, pricing carbon appropriately is an essential complementary piece to engaging in new technology development (to overcome the “valley of death” between technology development and effective and pervasive market penetration) and supporting other policies. Indeed, some technologies like carbon sequestration will not work at all unless carbon is priced – predictably and increasing over time. Flying in the face of this wisdom, the Copenhagen Consensus exercise almost precludes the identification of a policy portfolio by virtue of its very design (nothing but benefits versus costs) and its option-by-option ranking procedures.

Much of the expert criticism of Lomborg’s general projects is complex and technical, but here’s one particularly striking point: If the goal really is the most good for the most people, a form of utilitarianism Lomborg explicitly espouses, then surely the scale of the problem needs to be considered, not just the return on what may be, in context, a relatively small investment.

There’s a difference between, on the one hand, getting the biggest bang for your buck, and, on the other hand, doing the greatest good. If we really wanted to “do the most good” or “reduce the most suffering,” then surely we should consider the net benefit (benefits minus costs) and not (just) the ratio of benefits to costs. According to the expert climate economists who wrote the climate change report for the Copenhagen Consensus 08:

“[I]f the net benefit (total benefit – total cost) were compared for each policy proposal, the climate policy packages would most likely be ranked higher than most if not all options considered.” (Yohe et al., The inappropriate treatment of climate change in Copenhagen Consensus 2008, submitted, emphasis added)

*All translations by this reporter.
**This characterization of Lomborg’s approach as one of “deliberate deception” is found in Global Crises, Global Solutions, p. 269, edited by Lomborg himself. ]]> http://climateprogress.org/2009/12/17/lomborg-copenhagen-consensus-conservatives/feed/ 0 http://climateprogress.org/2009/12/15/vp-biden-nearly-900000-new-clean-energy-jobs-thanks-to-recovery-act/ http://climateprogress.org/2009/12/15/vp-biden-nearly-900000-new-clean-energy-jobs-thanks-to-recovery-act/#comments Tue, 15 Dec 2009 14:44:51 +0000 Guest http://climateprogress.org/?p=15926

This guest post was written by Dan Weiss, Senior Fellow at the Center for American Progress.

[Update: This post was revised after clarification of some figures in the Biden Report.]

On December 15, 2009, Vice President Joe Biden released a “Progress Report: Transformation to a Clean Energy Economy.” It documents the advances in clean energy investments and job creation during the first year of the Obama Administration.  Biden determined that the American Recovery and Reinvestment Act, and administrative actions are

“laying the foundation for a clean energy economy that will create a new generation of jobs, reduce dependence on oil and enhance national security.

“The Recovery Act investments of $80 billion for clean energy will produce as much as $150 billion in clean energy projects” due to leveraging private investment.

The Report estimates that just three programs with $29 billion in spending will leverage an additional $52 billion in private investments and create over 800,000 jobs.  This is would reduce the number of unemployed workers by 6 percent, and the lower the overall unemployment rate from 10 percent to 9.4 percent.

This estimate is very conservative because it does not include additional jobs from investments in advanced vehicles and batteries, energy efficiency – particularly weatherization of low income homes – and other programs.

For instance, the Department of Energy estimated that when the program weatherized 100,000 homes annually, “nationwide, the Weatherization Assistance Program generates 8,000 jobs.”  Before ARRA was passed, the Weatherization program received $250 million for FY 2009.  ARRA will increase this funding to $5 billion, or a 20 fold increase.  Assuming this would lead to proportionate increase in employment, the ARRA weatherization funding would yield a total of 160,000 jobs, which means that ARRA would generate nearly one million clean energy jobs.

The Vice President’s evaluation found many other profound changes brought by ARRA and other clean energy policies.

• Renewable electricity from the sun, wind and other sources will double between January 1, 2009 and 2012.

• Domestic renewable manufacturing capacity to produce wind turbines, solar panels and other equipment would double during this same time.

• Fuel economy would increase by nearly 9 percent by the end of 2010.

• Home energy efficiency retrofits would increase by ten fold – from 100,000 homes annually on January 1, 2009 to one million homes annually by 2012.

Despite the positive impact of ARRA, unemployment is still too high at 10 percent. Last week, President Obama proposed a series of programs to promptly increase employment, including

“a new program to provide incentives for consumers who retrofit their homes to become more energy-efficient, which we know creates jobs, saves money for families, and reduces the pollution that threatens our environment.  And I’m proposing that we expand select Recovery Act initiatives to promote energy efficiency and clean energy jobs which have been proven to be particularly popular and effective.”

Congress also plans to pass legislation to speed job creation.  House Majority Leader Steny Hoyer (D-MD) indicated a week ago that the House could act before Congress departs for its winter recess (subscription only), though action early in January is more likely.  The House of Representatives Sustainable Energy and Environment Coalition (SEEC) proposed inclusion of a number of clean energy jobs policies for any jobs bill. Thirty eight representatives in SEEC, led by Representatives Jay Inslee (D-WA) and Steve Israel (D-NY), wrote to Speaker of the House Nancy Pelosi (D-CA) and Majority Leader Hoyer to urge that additional jobs creation policies build on

“the success of the American Recovery and Reinvestment Act” by making “targeted investments and incentives for energy efficiency [that] can create jobs quickly while lowering energy costs around the country.”

The SEEC proposal urges that jobs creation legislation include a

“focus on residential, commercial and industrial energy efficiency retrofits, increased investments and tax incentives for renewable energy, and funding for transportation, water infrastructure, and lands projects.”

The proposal includes President Obama’s “Home Star” program to help home owners retrofit their houses for energy efficiency.  The SEEC letter also offers a number of other clean energy jobs policies promoted by the Center for American Progress and environmental organizations.

• Efficiency retrofits for federally assisted housing.

• Property assessed clean energy (PACE) bonds to help provide financing for energy efficiency measures for residential and commercial buildings.

• Establish a Clean Energy Deployment Administration to help deploy breakthrough clean energy technologies.

• Continue successful Department of Energy programs funded under ARRA but were over subscribed.

• Use more transportation funds for transit system operating costs to avoid service or job cuts.

These and SEEC’s other proposals would reduce energy use, save families money, create jobs, and reduce global warming pollution.  Hopefully, Congressional leaders will include these proposals in any job creation legislation.

The fireworks should fly for this one.  It looks to be Sunday on CNN at 1 and 5 ET (click here for Info).  People should post a video when and if it goes up Sunday afternoon.  I’ll be winging it to Copenhagen then.

This debate is courtesy of Fareed Zakaria (international times below):

Can the Nobel Prize winner in economics out-debate the Danish delayer?  I think so.

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