If we don't confront climate change,we won't end poverty

Jim Yong Kim, President, World Bank Group

February 2016

 Deutsche Version

 

Ms. Meier is a secretary. She lives and works in a small town in Germany. She has - very likely - never heard of the Paris Agreement, nor would it interest her. Let’s discuss why Ms. Meier is nevertheless key to the success of the Paris Agreement.   

One of the successes of Paris is the joint commitment to a complete change in our energy systems. The common goal to “holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels” provides a strong political signal. It also calls for a “balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century.” This will only be possible with a swift transition towards a fully decarbonized energy system.

To achieve the required reductions in greenhouse gas emissions, all sectors will need to contribute. Here are a number of reasons, why this discussion focuses on the electricity sector and specifically on coal-fired power generation:

  • Electricity is currently the largest emitting part of the energy sector in most countries;
  • Over 40% of global electricity is produced with coal, with a total increase of coal production from 3 Gt in the 1970s to over 8 Gt in 2014 [1];
  • The long investment time frames in the sector call for swift action to avoid missing the GHG goals or generating stranded assets;
  • Coal mining and power generation often dominates the economic structure in the region, leading to specific challenges.

Up to now, the impressive growth in renewable electricity generation has mostly addressed additional demand from growing economies. Renewable technologies instead of fossil fuel power plants formed part of new capacity built. For most countries event this is already a challenge. In 2014, only 45% of new power production capacity added globally came from renewable sources. In 2012 the World Resources Institute estimated that 1,199 new coal-fired power plants with a total capacity of 1,401,268 MW [2] were being proposed globally. These numbers highlight the magnitude of the challenge. Even in Germany, home to the famous ‘Energiewende,’ new coal-fired power plants are in planning [3].

If we are taking the Paris Agreement seriously, then we need to not only satisfy additional demand with zero-carbon technologies, but need to start changing existing generation systems. To some extent, this can happen ‘naturally’ by closing down coal fired power plants at the end of their technical lifetime and replacing the capacity with renewable technologies. But in most countries, including Germany, this will not be enough, given the number of plants that went online in the last years and will go online in the next few years, and which have a technical lifetime well beyond the 2050s.

So why should Ms. Meier care?

Ms. Meier lives close to the Polish border in one of the three main lignite mining areas in Germany. Lignite has been mined in the area since the 1850s. The first power plant went online in 1894. Open pit mining has dramatically transformed the landscape and relocated a multitude of villages and towns. The region delivered the bulk of the energy fuelling the economy during the existence of the GDR. The sector has been the foundation of the economy for over a century and is deeply engrained in the regional identity. Today, only around 8,000 people actually work in the sector in the area, compared to more than 10 times as many in 1989. Still, salaries in the sector are significantly above average and make an important contribution to the local economy. Ms. Meier has a part-time job in a small engineering firm. Her husband works in one of the coal mining operations, as did his father and grandfather. They are afraid to lose their jobs if the mining and coal power generation ends, and wonder if their two children will have a future in the area or if they, like so many others have already done, will need to move away.

Economic studies show the benefits of renewables and energy efficiency technology to society. They are important and demonstrate the benefits to society as a whole. However, they rarely take a more detailed look at the regional and local level. This is where it starts to get difficult: The new jobs they create may or may not be in the same regions and may or may not require similar skills to those jobs that are lost. From an economic perspective at the national level this may not matter - from a societal, political and regional perspective it does. It also changes how we need to communicate, support and steer the transition.

Ms. Meier’s employer is member of a local initiative that promotes the continuation of lignite mining and power generation in the area. He is afraid that the closing of the lignite operations will damage overall economic activity, making his business unprofitable, causing his 15 employees to lose their jobs. The initiative runs a website, lobbies politicians and organizes public events. This is one of the many examples how fear creates resistance to change.

Many, who are directly affected, like Ms. Meier, fear for their jobs and well-being. Others fear for their profits while some just feel generally insecure of what this change will mean for their lives. In total, this often leads to a situation where decisions to close down old power plants or mines or not approving new ones will politically be impossible. We need to recognize that these fears are legitimate and that we need to address them seriously, appropriately and with respect - without compromising on the final goal: a full decarbonisation of the electricity sector.

If we don’t take the legitimate fears of people like Ms. Meier, her husband and the millions like them around the world seriously, Paris will fail to deliver.

Clear political signals for a phase-out of coal-fired power generations are only a first step. Politicians will find it difficult to send those signals, with strong local opposition rooted in fear. To overcome this and create a positive dynamic we need to consider five principles:

  • Build strong stakeholder coalitions at the regional level, involving everybody affected and all interest groups to define realistic phase-out scenarios: Yes, it is hard, but there is no way around talking WITH rather than AGAINST each other. A lot of time, energy and resources are currently used on all sides to generate biased information to inform public and politicians to promote individual vested interests. All sides need to work together and agree on basic facts that allow to start discussing SOLUTIONS rather than PROBLEMS.
  • Facilitate stakeholders to create an individual vision for a development that works in the given context: The solutions will, by necessity, be individual and different for each affected region. It is essential that all interest groups and stakeholders in a region define the vision as well as the steps required to get there. This allows tapping their detailed knowledge and experience, this way creating realistic pathways and ensuring ownership and commitment in implementation.
  • Tailor support instruments to the individual vision: The standard solution for policy-related structural change is to create a fund. This is a bit like creating a working group, when you are not sure what else to do, and then hope they come up with something useful. Money for required changes is certainly an important element to support regions. It will, however, not be effective, if not used in a targeted way and with a clear and realistic vision to guide activities. Additional support may be required, depending on the vision, including changes in the legal and regulatory framework or cooperation with other regions.
  • Learn from experiences: Structural change is not a new phenomenon. Especially the coal-mining sector has seen multiple changes over the last century due to economic shifts, through mines being mined out or becoming economically unviable. While these processes were often slow and thus easier to adjust to, some were rapid, like the changes in economic structure in Eastern Europe in the 1990s. But also other sectors have seen major changes, resulting in whole regions needing to readjust. The textile industry in large parts of Europe is one example for similar large-scale structural change that affects whole regions. We need to look at experiences made with such processes within the sector, but also learn from other sectors and across borders. The fundamental challenge of re-orienting the economy in a region remains the same. We need to look more closely at what worked, what didn’t and - most importantly - why.
  • Develop new business models together with utilities and customers: Utilities and companies operating coal mines and coal-fired power plants are naturally opposed to phase-out plans, as it promises to cut profits and requires changes to well-established activities. We need to acknowledge that these companies provide work for a lot of people and electricity to important parts of our societies. Their expertise on the functioning of the electricity system is vital for ensuring stable systems. We need to make them part of the solution, with a clear vision on their future role in a new system. This requires to let go of cherished stereotypes on both sides and the will to overcome differences to create something new and better for the benefit of all.

Germany, as all other countries, is only at the starting point of this new road. Globally, we need to start changing existing systems, not only adding on some renewables. A recent proposal to bring all stakeholders together in a coal ‘round table’ for Germany is a good starting point. If this process can also manage to address the regional challenges posed through the required structural change in a bottom-up process that involves all stakeholders, it has the potential to become a role model for other countries and regions that are facing similar problems globally.

If we take all concerns seriously and invite stakeholders to help shape their future rather than only react and block, we might - just - make it in time to prevent the worst effects of climate change and make the Paris Agreement a lasting success.


 

[1] Around 70% of which are used for electricity/commercial heat generation, up from around 45% in the 1970s

[2] For comparison: total installed power generation capacity in Germany was only 183,600 MW in 2014

[3] Two new lignite plants and one hard coal plant in the permitting process, two more hard coal plants are already built and in test operations, with one more under administrative stop to construction