What the Arctic Scramble and the Collapse of General Motors Tells Us about Prospects for a Low Carbon Future

By Saliem Fakir · 25 Aug 2009

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Picture: torbein
Picture: torbein

A low carbon future is slowly in the making. A lot rests on the way in which the global geopolitical situation resolves itself in the next decade. There are some signposts of where things are likely to go. All of this is happening, in the backdrop of negotiations for a global deal on climate change.

As the demand for energy grows so will the competition for the last remaining reserves of fossil fuels. One will see a distinct Asia-Pacific emphasis, accounting for 87% of growth in energy demand. There will be fierce competition for the last remaining reserves of uranium, coal, gas, oil and other key commodities, which major economic powerhouses will depend on for their own economic growth and sustainability.

For the first time, non-OECD consumption of energy exceeded OECD countries in 2008, two-thirds of which was from China alone. For the sixth year running coal is the fastest growing fuel. The majority of the demand is from Asia.

To put things into perspective: global carbon dioxide emissions stand at around 30 giga tons (Gts)/annum. The power sector contributes about 11 Gts/annum and by 2030 the sector’s contribution will most likely reach 18 Gts/annum.

Fossil fuels contribute about 40% of the total share of these emissions with coal and gas making 60% of the total share from the power sector alone. The challenge is to get these emissions down to 450-400 parts per million (ppm) or less than a two degrees Celsius range. This is a massive ambition that will have to be undertaken as a collective effort.

Future economic growth is pivotal to financing the transition to energy alternatives. The transition to a low carbon economy can’t happen without first, the intensification of fossil use, because not enough time has been given for the second to emerge out of the bosom of the first.

At some point, the energy resources we have relied upon will reach a peak and they will become more expensive to extract. By 2030 world demand for energy will double.

In some cases demand will far exceed the availability of capital or infrastructure to be able to build sufficient capacity to meet the world demand. The capital required is in the range of $30 trillion. It is not clear where all this finance will come from. Some countries will do better than others.

What is certain is that everybody is working hard to bring the future forward as fast as possible. We are in a period where we will collectively have to make some radical changes.  It is an inevitable step despite the fact of any climate change threat. Climate change induced variability and vulnerability merely adds weight to the momentum of things.

Nonetheless, the transition to a low carbon economy requires dealing with two human conditions or vices if we are to make change possible -- selfish interest and the folly of sticking to old habits while the world is changing around us.

There are no better examples to illustrate this than in the story of the Arctic Ocean and the failings of General Motors (GM). They both tell us the story of the future -- which course of action to avoid and which to take.

In the first, climate change is affecting the melting of the Arctic Circle’s sea ice and parts of the polar cap and whereas this should be a dire warning for us to act quickly, instead it is having the opposite effect. A major conflict is developing over maritime claims.

There are 90 billion barrels of oil to exploit and the Northeast and Northwest Passage ways of the Arctic will become navigable with implications for further exploitation of new fishing grounds, mineral deposits and movement of goods.

An international row is taking place between the US, Canada, Norway, Sweden, Denmark and Russia regarding passageways and rights of territory in the Arctic Ocean. The Arctic was always treated as a place where countries would engage, for the benefit of humankind, in peaceful exploration and co-operative scientific endeavours.

Global resource scarcity is changing that. Realpolitik, as they say, is beginning to take over. Competition and greed is replacing co-operation. And, one must add to this toxic ambience a measure of nationalistic rivalry and distrust.

President Medvedev announced in June last year that Russia would establish a special strategic military force on the northern coastline of the Arctic Circle. A clear indication that Russia is not taking chances, as the Arctic Circle is witness to a new scramble and division of territory.

Russia sent off a submarine to plant a titanium flag on the ocean floor and extracted samples of soil to bolster Russia's claim that the Lomonosov Ridge is an extension of its territory. Russia is planning to lodge a bid for the area, measuring 1.2 million square kilometres, almost the size of Western Europe. The US and others of course are challenging this.

There are attempts to find a resolution to this conflict within the ambit of the 1982 United Nations Convention on the Law of the Sea (UNCLOS). This Treaty is currently being re-negotiated.

Under UNCLOS as well, there are negotiations on the go around changing territorial claims from a 200-mile economic zone to 500 miles from the continental shelf to the ocean. The timing of this change has a lot to do with resource constraints that are beginning to emerge within the trade in global commodities as well as countries wanting to lay claim to larger portions of the ocean’s waters.

So, here we go again, a region under threat from climate change is slowly becoming a theatre for resource claims, competition and conflict. The example of the Arctic Circle should wake us as to the reality of geo-politics and any projections for a Copenhagen outcome with its ambitious targets may well have to be tempered with a dose of geo-political realism.

The second is the example of GM. Once one of the largest car manufacturers in the world and one of the so-called 'big three' in the US recently called for Chapter 11 protection under US bankruptcy laws. GM’s reported losses since 2005 were about $90 billion and its market share has dropped by 40% since 1980 to other competitors, primarily Asian car manufacturers.

GM has had to be bailed out by the US government, which now has a 60% stake in GM with the Unions owning 17.5% of the company’s shares. Instead of reinventing of its products, it will spend the next couple of years reinventing its financial structuring. This will no doubt reduce its capacity to be a flexible and inventive company. GM will be reduced to a pithy player in the car market.

How did it come to this so suddenly? In the 1970s there was a quick response to the energy crisis from the US government when OPEC pushed up the oil price. One of those interventions involved fuel efficiency standards for cars known as the Corporate Average Fuel Economy (CAFE). The US reduced its oil demand significantly, but when oil prices dropped, old/bad habits crept back in. Consumers quickly forgot the crisis and life went on as if nothing happened. This is reminiscent of the electricity crisis in South Africa and the spike in oil prices we experienced last year. Concern has been replaced with complacency.

GM's response was also retroactive. It didn't take the cue from the oil crisis to change and look deep into the future. Instead, it lobbied and found ways to get behind the loopholes in CAFE and get the Congress to approve more subsidies for car manufacturers. It spent more money lobbying the US Congress and White House than it did trying to change its business model. Its mindset was one of avoidance rather than meeting the challenge of change. It began to adopt an insular culture.

GM's response to CAFE was not to create more energy efficient cars, but to flood the markets with gas guzzling SUVs and Hummers. It sent the message to the US consumer that Americans need not worry about changing. This was the wrong signal to convey given the symbolism that GM holds in the public imagination, as it was a leading company that represented success, progress and triumph.

The failure of GM and Chrysler is a symbolic moment. It marks a shift from an oil economy to something new and the financial crisis has merely sped it along. There is a shift to smaller, fuel-efficient cars. With this will come a shift in the mobility paradigm.

We are in the throes of a major revolution and won't be going back to the 1970's where change was temporary in order to accommodate an oil crisis blip. We are about to bear witness to a permanent shift.

If the Arctic Circle precedent is anything to go by, we are in the throes of a disorderly transition rather than a new world order.

We are still working on the assumption of an old world order when actually the conclusion of a treaty is taking place while a new world order is being fought for and emerging by the shear power of the Asia Pacific region plus Russia.

This has immense implications for the success of the deal and even if we agree the on the likely outcomes following the deal, the immense burden of implementation will have to be strictly adhered to if the agreement on climate change is to succeed.

A lot will depend on the mustering of political will from key heads of states.

Besides much of the burden for the financing of the new deal on climate change and the cost of implementation on reductions will have to be carried out by developed economies -- predominantly the US and Europe.

However, the US is in a major financial crisis and also carries a huge current account deficit. In the end the facts on the ground will shape the outcome in the negotiations or the extent to which expectation can be matched by national commitments and actions.

Going back to the GM example, there is a warning:  we must not make the mistake of the 1970's -- see the energy crisis as a short-lived phenomenon, but rather this crisis as pointing to the limitations of the existing energy paradigm.

Once we shift the way we think about energy, like transport technology, dealing with embedded energy, creating greater consumer awareness and investing in new models of living and work space, we slowly begin to build the foundations for a sustainable energy future.

But, for now, we must still deal with those vices that threaten to asphyxiate opportunity, human potential and our road to a better future -- the vices of selfishness and complacency.  We need to replace these with care, co-operation and responsibility. 

Fakir is an independent writer based in Cape Town.

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Miles Teg
28 Aug

So Should Developing Countries Offer to Cut Emmissions

The article calls for global cooperation, but does not say if the developing countries should agree to cut emissions! Also, there is little mention of technology and access to it - which is also very important in shaping the debate. It is no use having global cooperation if it itself results in problematic outcomes. Care, cooperation and responsibility are laudable goals - but what say you about generosity to the greedy rich countries. When poor countries raise their issues on Finance and Technology the rich countries argue 'competitiveness'. And the US may have a deficit, they also have a huge ecological debt to pay the rest of the world. That needs to be taken into consideration too. And let us not forget who we are dealing with here - the EU also has obfuscated its responsibility under the current Kyoto Accords - these are not people who stick to there word - and they should named and shamed for it. Burning up the planet and now it is everyone's responsibility. Other countries are PREVENTED by numerous barriers from leapfrogging to clean development. If they block this avenue then how do you even begin to talk to them?

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