Climate Conversations on Net Zero with Professor Sam Fankhauser

Aditi Sinha, December 3, 2021

We spoke with Sam Fankhauser, Professor of Climate Change Economics and Policy at the Smith School and the School of Geography and the Environment at Oxford University. He is also Research Director of Oxford Net Zero. Before moving to Oxford, Sam was Director of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. Here’s his take on COP26 and the way ahead for India and the world.

You’ve written and researched extensively on climate change for over three decades now. Can you tell us a defining moment in your life where you decided to work on climate research and action?

In the early 1990s, I was a young environmental economist looking for a Ph.D. dissertation topic, and the topics of the day were ozone layer depletion, acid rain and the circular economy. Climate change was a niche thing for the future. It was not viewed at all as the defining environmental problem of the time, but for me it was intellectually stimulating. I was fascinated by the first IPCC report that had just come out and wanted to find solutions in that area. My supervisor showed it to me and said, “Look at this, it’s brand new, it’s interesting. No economics in it, maybe there’s something interesting in that.” I never looked back. I persevered, because it became more and more important, more and more interesting over time.

Do you believe that COP26 has been a success?

Each COP meeting is an opportunity for negotiators to take stock of progress and increase their ambitions in tackling climate change with the backdrop of scientists’ latest findings. When COP26 is compared to the previous COP25, I believe it was actually quite successful. We’ve seen COPs like Copenhagen where the outcomes were less than expected, and then there was Paris where we were elated at the progress made. Most COPs, including COP26, are in between.

For me, it was significant to see the eye-catching announcements that happened at the start of COP 26, including India’s 2070 net zero target and the announcements for example on deforestation, methane and coal, which gave a sense to world leaders of ratcheting up their ambitions. The second part of the meeting was about the technical details, and it made clear just how much work remains to implement all these commitments.

What is the impact of the COVID-19 crisis on net zero?

The economic slowdown triggered by COVID-19 could make it harder to close the gap between climate objectives and actual carbon policy. There are some 2,000 climate laws in the world. Statistical analysis of the time when those 2,000 climate laws were passed shows that lawmakers are demonstrably less willing to act on climate change in difficult economic times.

There has been no shortage of exhortations to use the COVID-19 recovery for a “great reset” and to “build back better,” that is, to align recovery packages with the Paris Agreement. However, to date, only a small fraction of the massive fiscal support packages to cushion the impact of the pandemic is Paris aligned. How can we make economic recovery spending compatible with Net Zero? The US and the EU have attempted to do this with Green Deals. The benefits of such programmes are real. For example, building refurbishment or investment in green infrastructure fits the bill of a good fiscal stimulus. It can have a high multiplier effect, is timely and has immense environmental potential. But we are not living it yet, and it will be a while before things change on the ground.

The fiscal stimulus story is absolutely important for helping unemployed, underemployed workers back into the workforce. So, green labor-intensive activities like building refurbishment that we mentioned before have both economic and environmental benefits.

What can developed countries do to meet their commitment of $100bn of climate finance a year to support developing nations? Developed countries have said they will deliver on this pledge by 2023.

The $100bn climate finance commitment is about fairness and trust. It was promised and not delivered, and low-income countries are right to feel let down. In the post-COVID world, where massive amounts are spent kick-starting the economy, $100bn does not sound like that much money anymore, and the gap that remains to reach the $100bn is smaller still. So this should really not be that difficult to do.

But beyond the trust and the fairness and the symbolism of the $100bn, there is also the question of how we fix the problem, and here we are talking of tens of trillions of dollars, not hundreds of billions. Some of this is additional money, but most of it is about redirecting existing capital flows from dirty to clean. This will require not just public money but a lot of private investment. Some of the signals from Glasgow sound very promising in this respect, actually, but a lot of work will be needed to unlock these flows.

In your opinion, what is the significance of the India’s 2070 net zero pledge globally and for the country?

India’s emissions per capita are much lower than other major world economies, around 1.9 tonnes of CO2 per head of population. But on aggregate, India is a big emitter, and was the last of the big emitters to come into the net zero-fold.

India’s 2070 target is actually consistent with the spirit of the Paris agreement, which encourages countries to move toward economy-wide targets over time in the their different national circumstances.

The country now needs to lay out a clear road map for how it will achieve net zero, but I am optimistic that in the end India will decarbonize faster than it promised in Glasgow. The economic opportunities are too significant.

Global estimates of the size of the green economy vary quite a lot. Analysis from FTSE Russell estimate that globally, the proportion of green revenues generated by listed companies (those it tracks) is equivalent to a market capitalization of US$4.3 trillion, or 5.4% of the total value of globally listed equities. This makes the green economy larger than the oil and gas sector. Going ahead, one can see that there are definitely big opportunities for all countries, including India.

What are your expectations from COP 27 in Egypt?

COP27 will be of much lower profile than COP26. This is the usual cyclicality of COPs, where exhausting high-profile sessions (Kyoto, Copenhagen, Paris) are followed by technical COPs to consolidate and take stock. But the same issues will very much be on the agenda, and the relative lack of limelight may not be a bad thing.

We will be looking for stronger 2030 emission reduction plans – the long-term targets are now broadly there, but we need tangible measures to implement them, particularly over the next decade.

The debate about “phasing down” or “phasing out” coal, which dominated the final moments of COP26, was less about wordsmithing than mindsets. The actual words in the agreement matter less than the fact that India and China felt they needed them. The underlying motivations is what we now have to work on. And linked to this, of course, will be all the non-emissions issues COP26 left open, despite progress – climate finance, and loss and damage in particular.

Egypt will be a particularly appropriate host for COP27, which should be the African COP. The issues of climate finance, adaptation, and loss and damage should all be high on the list of priorities, and all are of particular importance to Africa, which is home to many of the most vulnerable people to the impacts of climate change.

At Shakti, we are beginning to look at policy interventions that will be able to cushion the states and communities who will be impacted by the move to clean energy. How can we make just transition and climate justice more inclusive?

Yes, these are the big challenges ahead. We need to do this right both because this is an issue of justice and because the opposition to net zero will be too big otherwise. The transition for those in high-carbon jobs must be as smooth and as easy as possible.

We are talking about deep structural transformation. Every part of the economy has to reinvent itself, and that is hugely disruptive in terms of the skills that are required. We shouldn’t kid ourselves because if you do hugely disruptive things, there will be pockets of people whose skills are no longer in demand. We have to help them to acquire new skills and become successful in the new economy.

Countries like India and Africa have a young workforce, which may help make the transition easier because such a workforce is not necessarily locked into their current jobs. There is still the need to educate and train the next generation in the right way, of course, as a part of the education system itself.

Globally, there are only a few examples of industrial transitions having been done in a just and equitable manner. The UK’s journey out of coal back in the 1990s was brutal and the scars are still there. The Ruhr Valley, in Germany, is a good example on the pivot from coal mining to a hub of green industry. It is a story of successful collaboration between the government, trade unions and the private sector with strategic investment planning, support for education, and underwriting pension for coal miners and those who lost their jobs due to the closing of mines.

Outside academia, Professor Fankhauser is an Associate Director of economics consultancy Vivid Economics. He was an inaugural member of the UK Climate Change Committee and its Adaptation Sub-Committee, and he served as a non-executive Director of CDC Group, the UK’s development finance institution. You can read more about his work and projects here.