A banking crisis mustn’t take the heat off climate change action

By James Cameron, a founder and vice-chairman of Climate Change Capital, the investment manager and adviser specialising in the low-carbon economy (THE TIMES, 16/10/08):

In the past few weeks we have seen graphic evidence of how institutions and individuals could create wealth that turned out to be illusory. The ability of capitalism to deliver real wealth so that society can survive and prosper is being seriously challenged.

The industry for creating wealth, which we assumed to be efficient, well organised and smart, has contrived to lose spectacular amounts of ordinary people’s money, requiring the State to intervene in the public interest. But it is also true that even now, capital markets continue to invest in creating risk – climate risk.

We are already hearing arguments for focusing everything on the economy damaged by failure in the banking system, dropping the need to fix the climate system. The EU summit in Brussels, which had climate change at the top of its agenda, is in danger of being swamped by the banking crisis. Of course, we should not trade one off against the other. We must tackle both.

Out of necessity comes opportunity. And we now have a chance to rethink our relationship with money, to realise that it matters how we create wealth as well as how much of it we create.

I take the view that liberal democratic markets, with the right regulatory framework, are the best way to distribute wealth and deliver the public good. But we must admit that we have failed properly to value many of the things that count most – a stable climate, thriving ecosystems, good soil quality and clean water, for example.

We must acknowledge that climate change is still seen by many as a threat for the future, a risk approaching slowly from afar. But the best evidence of the physical consequences of climate change shows that we face catastrophic losses over a century and real economic losses within years. London is as much at risk from rising sea levels as from financial meltdown.

We have no option but to turn our economic system towards solutions to the problem. Here are some things that need to be done in the next two years to show that we are serious:

Conclude negotiations on a global climate treaty in Copenhagen next December. For this, we need a higher level of co-operation between the holders of power than we have enjoyed since the end of the Second World War and the Bretton Woods Agreement – but this time with many more states involved

Persuade the new US Administration to make climate change a priority. Otherwise it will not be ready to be part of the global deal necessary to make it work

Accept the need for confident and competent governments: climate change requires collective action, which may mean more regulation with many levers such as tax, regulation and subsidy used. The setting of tough obligations to reduce emissions must underpin investment strategies in energy and infrastructure

Complete the process of creating, through law, a value for reducing carbon at every level of government – worldwide, European and domestic

Start huge investment in clean-energy infrastructure. This will involve redefining how we produce and consume energy. We must reduce demand, while enabling low or zero-carbon power suppliers to flourish. This can be achieved with today’s technologies – so-called smart grids, micropower and the many techniques for improving the energy performance of buildings

Start moving transportation away from fossil fuels towards electrification. Learn from the Danish experience with renewable-energy- driven electric vehicle fleets

Create a value for forests that enables them to be worth more alive than dead, so their ability to absorb C02 can be recognised

Commit resources to adaptation – building both physical barriers to rising sea-levels and more resilient ecosystems, such as mangroves at coastal margins

There is no need to be defeatist, but we must put into action the many words of agreement that we have had for years. We have learnt in the past couple of weeks that we can move a lot of public resources very fast if we have to. And we have to.

There are jobs in this – for engineers, construction workers, architects, scientists and the service industries that go with them. For instance, the construction in Europe of 10-12 new power stations, and the infrastructure to capture the carbon and store it, will create thousands of jobs. This has been made possible by a combination of public policy, public money (€10 billion) and private money (€20-30 billion).

Everything from urban development to white goods needs a fresh look, a designer’s eye allied to economic incentive. There is enterprise in the transformation to the low-carbon economy.

So where is the money? There is still plenty to finance this work. Pension funds and sovereign wealth funds, which have an interest in the long term, can allocate sufficient capital to deliver the items on my list.

Sovereign wealth funds are estimated to have more than £1 trillion in their coffers, much of it from the selling of fossil fuels. These funds have been designed to protect their citizens in a future when their natural resources have gone. Investment in alternatives to fossil fuels, energy efficiency and clean-energy infrastructure are indeed ways to safeguard the future for the beneficiaries of these funds – and for the rest of us

The fortunes of the 21st century will lie in the protection, not the destruction, of the planet. We can create wealth worth having.