Agustín Carstens, Governor of the Bank of Mexico, and Patricia Espinosa, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), in this treatise, explore the financial implications of the coming into force of the Paris Agreement, as finance ministers and central bankers converge on Washington, DC for the IMF and World Bank Group Annual Meetings

At the recent United Nations General Assembly in New York, Secretary-General Ban Ki-moon predicted the Paris Climate Change Agreement would enter into force before 2017, announcing 60 countries had now ratified its terms. This week (October 7-9), the International Monetary Fund and World Bank welcome an influx of finance ministers and central bankers, to its annual meetings in Washington, DC.

At first glance, these two events might appear totally unrelated. The imminent ratification of the Paris Agreement – a global deal to keep global temperature rise below 2°C – is a huge achievement and a real triumph for multilateralism. It also focuses the mind on the next step: how the Agreement will be implemented across the world?

Here, we get our first inkling as to why the finance ministers, central bankers and regulators meeting in Washington DC are so relevant to our story. Right now, progress is being made towards mobilising $100 billion in annual financing flows from rich countries to developing economies by 2020. Practical implementation is also taking place on the ground. Funding from the Green Climate Fund (GCF) is helping to build resilience into coastal and urban infrastructure projects in Bangladesh, while in Tanzania over 100,000 homes now have electricity through Off-Grid Electric, a clean energy company backed by debt financing from the Million Solar Homes Fund.

Yet overall, the cost of making the transition to a low-carbon future is measured in trillions. This quickly takes us far beyond the realm of public funds since no government – no matter how rich – can finance climate action through taxation and borrowing alone. One estimate suggests that around $90 trillion will need to be invested by 2030 in infrastructure, agriculture and energy systems, to accomplish the Paris Agreement.

This won’t happen without private capital and underlines why aligning the world’s financial system with the needs of climate action and sustainable development is every bit as important as emission reduction pathways and removing fossil fuel subsidies. Moreover, set against the $300 trillion of assets – held by banks, the capital markets and institutional investors – we’re faced with a problem of allocation rather than outright scarcity.

In fact, finance ministers and central bank governors are already deeply engaged. Those from G20 nations recently agreed a set of options to improve the ability of the global financial system to deliver green investment. One promising area is the rise of the green bond market where companies and municipalities can raise capital that is ring-fenced for priorities such as renewable energy, building efficiency and water management.

So far this year, the combined value of green bonds has grown to over $45 billion, a fourfold increase from 2013. By way of example, Mexico’s development bank, Nacional Financiera S.N.C (Nafin), issued its first $500 million green bond in November last year to finance wind energy in Oaxaca, Nuevo Leon and Baja California.

However, the world’s capital markets still do not fully incorporate climate factors when pricing assets and evaluating risk. In response, the Financial Stability Board setup a task force on climate disclosure headed by former New York mayor, Michael Bloomberg. Only with better and consistent reporting will banks, pension funds – and individual investors – be able to understand how the transition to a low-carbon economy will impact investments.

In all, the total number of policy and regulatory measures to build a more sustainable financial system has more than doubled in the past five years. This is a key finding of a new report published by UN Environment Programme (UNEP) (www.unepinquiry.org). It cites that measures taken by finance ministries, central banks and regulators to promote sustainable finance have risen to 217 and now exist in nearly 60 countries. These range from actions to steer finance towards clean energy through assessments of climate risk for insurance companies and on to roadmaps that set out how to green an entire financial system as China has just done.

These are all promising signs of positive momentum but the world’s financial architecture is still ill-equipped to deliver the necessary transformation. The national climate plans (INDCs) submitted by governments represent a real improvement on business-as-usual but do not yet provide the signals needed to steer capital towards global climate action. So while it is true investors are starting to measure the carbon footprint of portfolios and increase exposure to green assets, only a tiny minority has introduced comprehensive climate strategies.

The financial system clearly needs to evolve further to price environmental risks, overcome short-termism and deliver greater transparency on climate performance. Making this happen, and happen with a sense of urgency, will require different players to put in place mutually reinforcing financial policies and regulations that support the Paris Agreement. If we can get it right, private capital will respond and the trillions needed for transformation across countries will flow.

Canada has taken a remarkable step in the drive towards realising its climate change commitments, thanks to a fresh resolve to provide a yardstick to price carbon.

In March 2016, the First Ministers committed to putting the country on a credible path to meet or exceed its national target of reducing greenhouse gas (GHG) emissions by 30 percent below 2005 levels by 2030. The First Ministers agreed that this would require transitioning to a low-carbon economy by adopting a range of measures, including carbon pricing, adapted to the specific circumstances of each province and territory. Federal, provincial and territorial governments are developing a Pan-Canadian Framework on Clean Growth and Climate Change to implement these commitments, for adoption at the First Ministers Meeting in fall 2016.

Economy-wide carbon pricing is the most efficient way to reduce emissions and, by pricing pollution, will drive innovative solutions to provide low-carbon choices for consumers and businesses. British Columbia, Alberta, Ontario and Quebec, representing over 80 percent of the population, have already introduced carbon pricing. More action is needed, however, to expand the application of carbon pricing across Canada and ensure that it plays a significant role in reducing GHG emissions by increasing its stringency over time, says Government in a recent statement.

The Government of Canada says in the release that it supports the following principles, which are based on those proposed by the Working Group on Carbon Pricing Mechanisms:

• Carbon pricing should be a central component of the Pan-Canadian Framework.
• The approach should be flexible and recognise carbon pricing policies already implemented or in development by provinces and territories.
• Carbon pricing should be applied to a broad set of emission sources across the economy.
• Carbon pricing policies should be introduced in a timely manner to minimise investment into assets that could become stranded and maximise cumulative emission reductions.
• Carbon price increases should occur in a predictable and gradual way to limit economic impacts.
• Reporting on carbon pricing policies should be consistent, regular, transparent and verifiable.
• Carbon pricing policies should minimise competitiveness impacts and carbon leakage, particularly for trade-exposed sectors.
• Carbon pricing policies should include revenue recycling to avoid a disproportionate burden on vulnerable groups and Indigenous peoples.

The Government proposes a pan-Canadian benchmark for carbon pricing that reflects these principles and the Vancouver Declaration. Its goal is to ensure that carbon pricing applies to a broad set of emission sources throughout Canada with increasing stringency over time to reduce GHG emissions at lowest cost to business and consumers and to support innovation and clean growth.

The benchmark includes the following elements:

1. Timely introduction. All jurisdictions will have carbon pricing by 2018.
2. Common scope. Pricing will be based on GHG emissions and applied to a common and broad set of sources to ensure effectiveness and minimise interprovincial competitiveness impacts. At a minimum, carbon pricing should apply to substantively the same sources as British Columbia’s carbon tax.
3. Two systems. Jurisdictions can implement: (i) an explicit price-based system (a carbon tax like British Columbia’s or a carbon levy and performance-based emissions system like in Alberta), or (ii) a cap-and-trade system (e.g. Ontario and Quebec).
4. Legislated increases in stringency, based on modelling, to contribute to our national target and provide market certainty. (a) For jurisdictions with an explicit price-based system, the carbon price should start at a minimum of $10 per tonne in 2018, and rise by $10 per year to $50 per tonne in 2022. (b) Provinces with cap-and-trade need: (i) a 2030 emissions reduction target equal to or greater than Canada’s 30 percent reduction target; (ii) declining (more stringent) annual caps to at least 2022 that correspond, at a minimum, to the projected emissions reductions resulting from the carbon price that year in price-based systems.
5. Revenues remain in the jurisdiction of origin. Each jurisdiction can use carbon pricing revenues according to their needs, including to address impacts on vulnerable populations and sectors and to support climate change and clean growth goals.
6. Federal backstop. The federal government will introduce an explicit price-based carbon pricing system that will apply in jurisdictions that do not meet the benchmark. The federal system will be consistent with the principles and will return revenues to the jurisdiction of origin.
7. Five-year review. The overall approach will be reviewed by early 2022 to confirm the path forward, including continued increases in stringency. The review will account for progress and for the actions of other countries in response to carbon pricing, as well as recognition of permits or credits imported from other countries.
8. Jurisdictions should provide regular, transparent and verifiable reports on the outcomes and impacts of carbon pricing policies.

The Government will work with the territories to address their specific challenges.

The pan-Canadian approach to carbon pricing is described as a practical and cost-effective way to address climate change and will contribute to substantial emission reductions, stimulate innovation, clean growth and jobs for the middle class to support the transition to a low-carbon economy.

The Government says it is committed to continuing to work with provinces and territories to implement carbon pricing as a central component of the Pan-Canadian Framework on Clean Growth and Climate Change. It will also continue to engage with Indigenous peoples, it adds.

“By acting now and acting together, we will build a better Canada for our children and grandchildren,” says the Canadian government.

As the world is confronted with the most threatened and complex challenges of climate change, developing countries are the most vulnerable and heavily impacted by climate variability, lacking the political and economic will to reduce and cope with the changes. These inadequacies often characterise the bloc’s negotiation setback among other world region in reaching a global climate agreement, though this is not the focus of this article.

A case in point is the most rapidly growing populous country in sub-Sahara Africa with about 180 million people and projected to over-double to 400 million by 2040, Nigeria is struggling with the everyday reality of climate-induced challenges. Most of these challenges are weather-pattern dependent cutting across the ecological zones of the country resulting in conflicts and insecurity, flooding, food shortage, environmental degradation and habitat loss of wildlife species, drought, rural-urban migration, disease and infection. These climate-induced challenges are exacerbated by the complex issue of poverty as Nigeria’s poverty level index worsened to 72% record-high in August 2016 from 60% in 2015 with an average citizen living on $.05 per day compared to $ 1.1 per day respectively within the last five years according to a 2016 Fitch International report.

One obvious victim of climate change that has impacted Nigeria’s ecological and socio-economic landscape is the Lake Chad Basin – a trans-boundary wetlands covering Cameroun, Chad, Niger, and Nigeria with extension to Central African Republic. The Lake Chad Basin is one of Africa’s largest closed sedimentary groundwater basins and encompasses three climate zones: the Saharan desert climate in the north, the Sahel in central Chad with its wet and dry seasons, and the Sudan zone in the south with a hot, wet-dry tropical climate. This results in marked regional and season variation in rainfall. A 2004 UNEP Global International Water Assessment report shows evidence of the shrinking of the surface area of Lake Chad Basin from an approximately 25,000 km2 in the 1960s to 1,350 km2 in the 2000s. The two major causes of this reduction are climate variability and increase use of inflows from tributaries for irrigation and household needs of the growing population of 17 million in 2005 to 34 million within the past five years.

In 2012, the United Nations alerted on the severe implication and current impact of the vanishing Lake Chad on the rural livelihood of Nigerians dwelling in the region, calling on actions to halt the “ecological catastrophe”. Regional terrorism has typified the entire cross-boundary countries resulting from the drying Lake Chad which used to be the irrigation source for agriculture in the region. Unfortunately, it cannot ensure continued provision of this ecosystem services making locals find alternative source of livelihood resorting to Boko Haram – the deadly terrorist group that operates in the north-eastern Nigeria, Cameroun and Chad with questionable links with other international terrorist group. Aside financial gratification which comes with joining the terrorist group, easy marriage, government neglect as a result of oil boom are factors that have contributed to the proliferation of the terrorist group as a result of the vacuum created by the drying lake chad National Social Violence Research project.

Pastoral farmers/herdsmen in this region and other part are also forced to migrate down south where they can access greener pasture for their herds usually on farm land, leading to severe crisis among smallholder farmers and herdsmen. This has been a daily occurrence in Nigeria’s agricultural space, claiming an alarming number of lives and properties as pastoralists now carry dangerous weapon/armoury purportedly as self-defence to inflict pain on harmless farmers who do not allow such act.

The climate variability impact on Lake Chad has also worsened the abundance and conservation status of biodiversity that utilise the wetlands as refugia for their ecological activities. The number of endemic and migrant birds on the lake continues to decrease over the year due to water loss in the lake leading to aqua-resource degradation.

Already there is a very high infestation of some channels that feed the lake with water, by an invasive plant – Typha. This phenomenon over the years have limited the fish catch affecting the rural economy of the community. The success of 17-year-old conservation and livelihood effort of Nigerian Conservation Foundation (NCF) and its international partners – WWF, IUCN and BirdLife International, in the Hadeija Nguru Wetlands – a section of the Lake Chad basin in Nigeria, have a significant positive impact on wildlife and people in the region. NCF re-afforestation and livelihood projects have contributed to reduce the pressure of climate change on migratory birds and poverty.

Sea level rise has resulted in flooding occurrence dotting the agricultural and built-environment landscape in Nigeria, and affecting people in thousands from rural to urban centres. Okun Alfa community in Lagos is at the verge of extinction and the authorities are considering the relocation of the people as sea level continues to rise in the area. Similarly, farmers are worried and uncertain about the future of their investment in agriculture as farmlands are destroyed by flooding events in most agrarian states in Nigeria causing displacement of people. This becomes a severe threat to food security, thereby limiting Nigeria’s production capacity to meet the national demands which is exhibited in high cost of food import.

Among the numerous international government-assisted adaptation programme for Lake Chad Basin is an on-going five-year Germany-funded “Adapting to Climate Change in Lake Chad Basin” led by the Lake Chad Basin Commission to incorporate climate smart agriculture practices into farming/harvesting practices, storage practices, and value chain diversification for smallholders farmers who largely practice rain-fed agriculture making them vulnerable to climate variability.

Building Resilience

In order to forestall difficult times for Nigeria as one of the most vulnerable countries to climate change impact, there is need for the implementation of climate actions at all levels. Nigeria is committed to reduce carbon emission by 20% unconditionally and 45% conditionally by 2030 as stated in the country’s Nationally Determined Commitment (NDC), which is one of the roadmaps to keeping temperature well below 2oC targeting 1.5oC.

As the world passes the 400ppm threshold of CO2e in September this year, Nigeria must pursue a low carbon development pathway without compromising its developmental priorities through the implementation of climate actions. Everyone has a responsibility to cool the earth with our lifestyle if we do not want to leave a destroyed planet for our future generation.

Just recently at the UN General Assembly in New York, nine African nations joined the front runners to ratify the Paris Agreement signalling a genuine commitment in the regional bloc to fight climate change.  This very commendable effort will engender Nigeria’s promptness to do the same as the Paris Agreement enters into force as 73 countries already deposited their ratification instruments representing about 57% of emission reduction commitment, and surpassing the required threshold of 55%.

The innovative financing approach of issuing green bond by the Federal Ministry of Environment to finance the $142 billion NDC could be a great start to this process but must also be planned carefully to reduce the risk of the current economic recession competing with reality of its achievement.

However private sector players must be ready to drive a low carbon pathway within their business operation to reduce their carbon emission with a larger effect on reducing global temperature.

A national Afforestation and forest regeneration effort that could nosedive the global temperature is one action among many others that will save Nigeria from current climate-induced disasters. NCF is ready to drive such with its greenery initiative which will bring back Nigeria’s forest cover from current 4% to the FAO-recommended 25% forest cover in the next few decades. It will accommodate current tree planting initiatives of most State government in Nigeria, thereby feeding the long term goal of this initiative.

By Solomon Adefolu, Climate Change Coordinator, Nigeria Conservation Foundation (NCF)

“Wild animals are confused, they see light for 24 hours and cannot understand what is going on. Children in Turkey are suffering from asthma as a result of pollution in the atmosphere. Ecosystems have changed and are still changing, glaciers are melting, sea levels are rising, the climate is obviously changing and at very rapid rate. Scientists have attributed all these changes majorly to the activities of fossil fuel companies that has brought upon the world climate change.”

This is just to mention a few of the negative impacts of the fossil fuel industries activities to mankind and the environment.

Investigations and reports have proven that the fossil fuel industry knew that their activities caused climate change more than three decades ago, but what did they do about it? Pay for campaigns to spread the wrong information. The technology of avoiding carbon dioxide emissions from entering the atmosphere by seizing it (carbon capture and storage) was discovered and used in the 1970s.

Instead of fossil fuel industries instilling it in all operations, to stop greenhouse gases from entering the atmosphere, it was mainly used to make profit while gas flaring continued. For many years the oil giants invested millions in watering down the fact that burning of fossil fuels is one of the major causes of climate change, depriving the world of the opportunity to take action earlier.

According to Inside Climate News, a presentation was made to Exxon’s top management in 1977 highlighting the fact that burning of fossil fuels released carbon dioxide into the atmosphere thereby tampering with the climate.

The big oil companies or the fossil fuel giants have often been likened to the tobacco industry, both powerful, with the same motive and history of concealing important information, that links and proves that their activities are very detrimental to human health and environment respectively.

The US Securities and Exchange Commission Filings for Exxon Mobil 1999-2005 Gross Annual Profit, stated: “Just as Big Tobacco lied about the risks of addiction and Cancer, Exxon orchestrated a campaign of doubt and deception, making hundreds making hundreds of billions at the cost of people’s lives- now it’s time for them to face the consequences.”

In the same vein, it is not out of place for the same punitive measures expended on the tobacco industry by the World Health Organisations (WHO) convention to be used for the fossil fuel industry by the United Nations Framework Convention on Climate Change (UNFCCC). The Framework Convention for Tobacco Control succeeded in not only restricting the tobacco industry from participating in the negotiations, but made them pay for the harm they had caused.  With the Paris Agreement entering into force just in time for the Conference of Parties in Marrakech, Morocco from the 7^th to 18^th of November 2016, the UNFCCC should start limiting the influence and participation of fossil fuel lobbyists.

They need to be brought to book, by starting to pay compensation to developing countries, and should be mandated to contribute to the climate finance goal (towards the mobilisation of $100 billion till 2025 by the UNFCCC). What happened in Paris should never happen again, where fossil fuel industries sponsored the conference, thereby influencing decisions. They should be restricted from being part of the climate negotiations. The UNFCCC should urge G7 countries and world leaders that are parties to the convention to stop funding fossil fuels and redirect that money to renewable energy.

By Chinma George (Climate finance consultant, @Chimz_green)