Problems and Solutions to the Climate Crisis from the World Economic Forum in Davos

Ahead of the 2015 deadline for a global climate deal the Davos World Economic Forum (WEF) sought action from business, governments and investors. WED took place in Davos Switzerland on January 22-25, 2014. The theme of the summit was “Reshaping of the World: Consequences for Society, Politics and Business.” As the year before we are scheduled to forge an international climate agreement, 2014 is a critical year for the international community.

The Problems

As profound forces transform our world the international community is focused on crisis rather than the long view of a strategically driven approach. With the aim of helping to encourage business to engage the risks associated with climate change, the Davos Summit dedicated an entire day to and 23 sessions to discussing climate change, building resilience, and sustainable development through public-private partnerships.. WEF said that it hopes that this new push will “drive the subjects of economic risk and resilience back to the top of the climate change agenda – where they belong”.

In addition to risk and resilience associated with climate change WEF also explored plans for a new public-private group to explore policy responses to melting Arctic ice. the rapid melting through a dedicated council that is “examining ways of protecting the Arctic from unsustainable development, bringing together governments, business, civil society and scientists to prevent this catastrophe”.

“Now is the time to act for future generations before it is too late,” World Bank President Jim Yong Kim explained. “This is the year to take action on climate change. There are no excuses.”

Rising Temperatures

Current emissions reduction pledges are insufficient to prevent the internationally agreed upon upper 2 degree Celsius temperature rise limit. If we continue on our current trajectory the world will face a temperature increase of at least 4 degrees in the coming decades.

Rising Costs

The economic argument for action is strong. Corporations, governments and investors are compelled to act due to the rising costs associated with extreme weather. Globally, weather-related losses and damage have risen from an average of about $50 billion a year in the 1980s to close to $200 billion a year over the last decade.

Developing Countries

The World Bank says that in the poorest countries, climate change will increase the cost of development by one quarter to almost one third (25 to 30 percent). The impacts could have a disastrous impact and ultimately undo decades of development gains pushing millions of people back into poverty.

“We have to help poorer countries in this transition,” President Kim said. “We have to reduce the risks of low-carbon investments, especially in developing countries, but we can do it – development financial institutions can leverage their capital and use the Green Climate Fund to reduce that risk and catalyze new investment in resilience.”

The Solutions

There are no facile solutions to the complex economic, social and political problems posed by the climate crisis. However through consorted international action at multiple levels we can address the serious threats we face. Here are some of the key recommendations out of the WED in Davos.

Corporate Action

Due to shortages of water supplies, and disruptions all throughout their supply chains climate change represents a serious threat that requires immediate corporate attention. The costs of issues including sea level rises and extreme weather cannot be ignored. However in addition to these threats there are also powerful opportunities. Now is not the time to wait on the sidelines.

A number of leaders were recognized including Google for its massive investment in solar power and its use of a shadow price on carbon for strategic planning. Philips was acknowledged for the improving energy efficiency of all its lighting products and its off-grid lighting and LED street lighting.

Government Action

President Kim cited the need for governments to demand that companies disclose their climate risk exposure. Perhaps most importantly he called for governments to put a price on carbon. Through the World Bank’s Partnership for Market Readiness, countries are
developing and implementing policy options and the next generation of
carbon pricing instruments that can promote growth, competitiveness, and
low emissions.

The governments of several countries were singled out for acting on climate change and pursuing associated economic opportunities. China was mentioned for having launched five emissions trading pilots in
cities and provinces in 2013 and its aggressive target for a
national system. Mexico, was acknowledged for its carbon tax, target of 35 percent renewable energy, and retail electricity consumers’ billing credit for contributing renewable power. Morocco was recognized for its renewable energy super grid and setting up an agency dedicated to solar power. The Philippines was noted for having suffered the ravages of Typhoon Haiyan and its aggressive renewable energy targets, government incentives and allowing consumers generating power to sell it back to the grid.

Investor Action

Investors are seeing returns on their investments including returns on exchange-traded funds in clean energy of up to 140 percent last year. Kim said more needs to be done and he urged institutional investors to commit to green bonds targets in their portfolios. He called for doubling the market for green bonds which support climate adaptation and mitigation projects. He wants to see an investment of $20 billion this year and $50 billion by the time a new international climate agreement is reached in Paris in 2015.

Five Areas for Action

1. Building low-carbon, climate resilient cities.

2. Moving forward on climate-smart agriculture.

3. Accelerating energy efficiency and investment in renewable energy helps shifts the world away from high-carbon fossil fuels.

4. Ending fossil fuel subsidies and developing carbon pricing to get prices right for emissions.

5. Reducing short-lived climate pollutants (SLCP).

“In 20 years, all of us will be asked the question, ‘What did you do to fight climate change?’” President Kim said. “The leaders here in Davos, both from the private sector and from governments, have in their power to act in substantive ways.”

As we work towards the 2015 deadline for a global climate agreement the World Bank will be working closely with governments to provide the data, evidence, and analysis necessary for each to set robust national emissions reduction targets and for developed countries to also provide the technology, finance, and capacity-building support that developing countries need to start on a clean-growth trajectory.