The Cop26 message? We trust big companies, not states, to solve the climate crisis | Adam Tooze

C.op26 did not deliver a major climate agreement. In truth, there was no reason to expect one. The drastic measures that could pave the way to climate stability in one fell swoop are politically or diplomatically unsustainable. Like climate collapse itself, this is a fact to be reckoned with, a fact not just about “politicians” but about the policies of which we are all, whether they like it or not, a part. The step from the scientific recognition of a climate emergency to a social agreement on radical measures is still too big. All the negotiators at Cop26 could do was workaround.

In climate finance, the gap between what is needed and what is on the table is staggering. The talk at the conference was all about the annual $ 100 billion (£ 75 billion) promised by rich countries to poorer countries in 2009. The rich countries have now apologized for falling short. The new resolution provides for the difference to be settled by 2022 and then a new framework to be negotiated. It is symbolically important and of practical help. But as everyone knows, it falls ridiculously behind what is necessary. John Kerry, America’s chief negotiator, said so himself in a speech to the CBI. We don’t need billions, we need trillions. Somewhere between $ 2.6 trillion and $ 4.6 trillion annually in funding for low-income countries to ease the crisis and adapt to it. Those are numbers, Kerry continued, no government in the world will be able to keep up. Not America. Not China.

We should take the advice. There won’t be a big green Marshall Plan. Even Europe or Japan will not raise trillions in government money. The solution, if there is one, will not be for rich governments to shoulder the global burden on national balance sheets.

So how does Kerry propose to fill the gap? For him, the solution is private. Hence the excitement over the $ 130 trillion Mark Carney claims to have rallied in the Glasgow Financial Alliance for Net Zero, a coalition of banks, asset managers, pension and insurance funds.

Lending by this group will not be discounted. The trillion, Kerry insisted to his Glasgow audience, will make a decent return. But how will they then flow to low-income countries? Because if there was a reasonable chance of making a profit by wiring West Africa with solar power, the trillions would already be at work. Larry Fink of BlackRock, the world’s largest fund manager, has the answer. It can steer trillions into the energy transition in low-income countries if the International Monetary Fund and the World Bank “reduce” lending by absorbing the initial losses on projects in Africa, Latin America and Asia. Even more money will flow if there is a carbon price that gives clean energy a competitive advantage.

It is a clean solution, the same clean neoliberal solution that has been offered over and over again since the 1990s. The same solution that was not delivered.

The discussion about CO2 pricing evokes bitter memories of shock therapy in Eastern Europe and developing countries. BlackRock’s backstop idea is the logic of the 2008 bank bailouts expanded to the global level – socializing the risks, privatizing profits.

At this point, the promised trillions of private funds to combat the climate crisis turn out to be true utopians, neoliberal utopians. CO2 pricing – a fee that is levied on emissions – could be the favorite of economists. Ironically, the only place it could work is in Europe, where energy is already heavily taxed and the world’s most advanced welfare states can cushion the impact. China is experimenting with the largest carbon market yet. But as a global proposal, a single minimum price for CO2 isn’t a starter, especially in the US, whose economists invented the idea.

Neither will Congress or a European Parliament be voting for hundreds of billions of dollars to support BlackRock. Western states carried out rescue operations in 2008 and 2020. But these were desperate efforts faute de mieuxto save the status quo at home. And that was poisonous enough. On a global scale, it has zero political appeal.

The risk, however, is not that Cop26 will open the door to a gigantic neoliberal climate patchwork, but that we will instead remain trapped in our current impasse and head towards disaster.

Given this prospect, both the US and the EU appear to be less preoccupied with grand carbon pricing and blending plans than with a one-off approach. Four separate initiatives show the direction of travel.

The aluminum and steel deal announced by the EU and the US ends one of Trump’s more absurd trade wars and turns it into a process to agree on accounting rules for carbon. A high-tech trade zone for clean steel with tariffs on high-carbon imports from China, Russia and Ukraine seems conceivable. It is not a global carbon price, but a sectoral buyers’ club from rich countries.

While the final statement on coal was disappointing, the US is working with India to encourage the adoption of renewable energy. This includes a three-way partnership with the United Arab Emirates to provide technical assistance and funding to expedite the move away from coal. India is not the only emerging market with a coal problem.

One of the best news from Cop26 was the $ 8.5 billion multinational package.

In history, key to accelerating the pace of industrial change is to incentivize first movers – leading companies adopting new technologies, sending the message to their competitors: innovate or lag behind. The announcement in November by the First Movers Coalition, backed by the US and the World Economic Forum and involving companies like shipping giant Maersk and Cemex and Holcim, two of the world’s leading cement manufacturers, could unleash a race to the top and could unleash a significant move.

Finally, there is an agreement to reduce emissions of methane, the long-neglected but deadly greenhouse gas, by 30% by 2030. This will require a technological push in the entire oil and gas industry worldwide.

Green New Deal advocates have long been pushing for government-led industrial policy. The approach taken by Kerry and his team seems to follow a rather reserved, pragmatic script. As Danny Cullenward and David Victor write in their book “Making Climate Policy Work”, the key is to try to find coalitions of the willing instead of big controversial deals and drive change sector by sector and raise ambition through repeated rounds of negotiations.

Like the 2015 Paris Agreement, which first demonstrated this pragmatic approach in practice, the Kerry initiatives face two big questions. Will a series of ad hoc measures lead to an adequate overall solution? In addition, not every deal can be win-win. How are the tough compromises carried out? Whose interests are being taken care of? The answer of the pragmatists is that no general answer can be given beforehand. The proof of the pudding lies in the food. It’s not a great answer. But as Cop26 testifies, it may be the only realistic one.

If so, the climate movement should respond to keep up the pressure. Politically pragmatic ad hocery may be realistic, but the shrinking CO2 budget is beyond negotiation. With the status quo deeply rooted, the temptation to pursue conservative wishful thinking is pervasive. Somebody has to hammer the message home. The greatest risk is not to change.

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