Stefan Reichelstein: Paris May Be the Last Best Chance on Climate Change

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A child embraces a globe-shaped balloon during a rally held ahead of the 2015 Paris World Climate Change Conference. | Reuters/Alessandro Bianchi

As global leaders get down to final negotiations in Paris on a comprehensive plan to reduce greenhouse gas emissions, skeptics have been vocal on all sides.

Advocates for bold action complain that the pledges offered so far aren’t nearly enough to limit global temperature increases to 2 degrees Celsius — the maximum increase that climate scientists say is possible without causing catastrophic climate change. Climate change skeptics warn that a pact would cripple economic growth and create a huge transfer of wealth to developing nations. And political critics wonder whether the pact would even have much impact, given that the agreement wouldn’t be legally binding.

But Stefan Reichelstein, a professor at Stanford Graduate School of Business and the research director at the school’s Energy Business Innovations, says these talks are crucial.

“The Paris talks are arguably the last, best chance for a comprehensive and global agreement on reducing carbon emissions over the next few decades,” he says. “Without a meaningful agreement in Paris, governments all over the world will fall back on their own piecemeal policies, without any reasonable assurance that this global problem is being addressed.”

The Moore’s Law Benefit

Reichelstein agrees that the opening offers that countries made before Dec. 1 do not add up to the reductions that climate scientists say are necessary, and there are disagreements on major issues.

Even so, he says, the stakes in Paris are historic. A gradual but sustained path of emission reductions, even with today’s technological capabilities, would be far less costly than the damages that economies all over the world would face from rising ocean levels and more frequent extreme weather events. Insurers estimate, for example, that Superstorm Sandy alone caused an estimated $70 billion in economic losses.

But as the author of numerous studies on the cost trajectories of low-carbon technologies — from solar power to carbon capture systems — Reichelstein also says the cost of averting catastrophic climate change is lower than opponents think.

In a previous study, Reichelstein confirmed that solar power has its own version of Moore’s Law, which holds that the power of semiconductors doubles about every 18 months. The long-term trend for solar panels, says Reichelstein, has been that their prices decline about 20% for every doubling of total deployment. In recent years, the decline has actually been somewhat faster and, importantly, manufacturing costs for solar panels have been dropping at an even faster rate

Similar effects are predicted for carbon capture and storage systems in power plants. In a 2014 study, Reichelstein and his coauthor Stephen Comello estimated that natural gas power plants could be fitted with carbon-capture systems that reduce CO2 emissions 80%. Initially, power producers would need tax credits to make these carbon capture investments, but those incentives could be cut back quickly. Ten years out, the clean electricity could cost just 1 to 2 cents more per kilowatt-hour than electricity from a traditional natural gas plant.

Those trends reflect the economic power of learning curves: The more broadly a new energy technology is deployed, the faster its costs decline. The key, therefore, is to keep deploying the new technologies on a big scale, which requires regulatory and tax policy that creates the incentives to invest.

“Keep in mind that the United States has already achieved substantial emission reductions over the past 10 years, from 6 gigatons to 5 gigatons,” Reichelstein says. “Similar rates apply to the European nations.”

The Paris negotiations could be a historic turning point, Reichelstein says.

More Players at the Table

Perhaps most important, the prospective pact would include both advanced and developing economies. That’s a major difference from the ill-fated Kyoto Accord of the early 1990s, which excluded major emitting nations such as China and India.

Because the Paris deal would ideally embrace 190 nations, it would undermine the political objections of many in the United States who believe reducing greenhouse gas emissions domestically is the economic equivalent of unilateral disarmament.

Even though an agreement in Paris would not be legally binding, Reichelstein says it would be far from toothless. Because governments would be publicly committing to specific and measurable targets, the agreement would keep political leaders under strong public and institutional pressure to make good on their pledges.

Industrialized nations can also offer both carrots and sticks to maintain discipline, Reichelstein says. One step: Make financial assistance from international institutions such as the World Bank conditional on a nation’s adherence to its emission targets. Similarly, the World Trade Organization could allow nations to impose tariffs on imports from countries that have failed to meet their targets.

“There is no question that going on a carbon diet will impose some costs on energy consumers,” Reichelstein says. “But these costs are already manageable today, they are coming down quickly, and most importantly, they pale compared to the costs of inaction.”