It was not so long ago when people used to assume that future generations would automatically be better off than the current one, the only question being by how much. In the recent months, people have been feeling increasingly uncomfortable as their conventional notion of the life cycle is being questioned by those who are much younger than them.
Children are angry at adults because they believe past and current economic activities have been and are still being conducted at the expense of future generations, thus making children worse off than their parents and grandparents.
Greta Thunberg’s speech at the United Nations last month sparked a wide range of reactions. Thunberg has galvanized the youth movement, calling for immediate actions to address climate crisis. But a large number of high-profile leaders, including some heads of states, characterized her as an alarmist and defended their position, claiming they are doing enough.
Factually, there was nothing new or astonishing in Thunberg’s speech. Figures cited in her speech are based on data provided by well-known scientific organizations such as Intergovernmental Panel on Climate Change. Indeed, the IPCC special report released last year makes it clear the next decade will be decisive if we are to contain global warming from pre-industrial levels to 1.5 to 2.0 degrees. A number of international organizations, academic institutions and NGOs have repeatedly made similar remarks, calling for radical actions to avoid catastrophic consequences for the planet and mankind.
But presenting people with facts and data has not been enough to mobilize governments and businesses to act with urgency on climate change. After a three-year plateau between 2014 and 2016, energy-related carbon dioxide emissions are rising again, reaching unprecedented levels in 2018. The jump from 2017 emissions was equivalent to the amount of total emissions from international aviation last year. Coal, oil and gas continue to meet the lion’s share of growth in the demand for global primary energy.
Thunberg’s emotional pitch to “act now” has played on our hopes and fears about environment, love and longing for a better future for our children. It was a powerful delivery of the message that we have forced upon our children to accept short end of the stick, and we need to change it now. When Thunberg claims we adults have stolen her dreams and childhood with our empty words, we can do better than just rolling our eyes and saying she is being manipulated by environmentalist groups.
It’s time for leaders in governments and businesses to face up to the growing anger, particularly among young people. In thinking through how to tackle this challenge, we should remember there are several policy tools and regulatory measurements, which can be effective if deployed swiftly with the strong political will of adults. Taxing polluting sources of energy can be one of them.
The Organization of Economic Cooperation and Development just announced a study indicating adjusting taxes, along with state subsidies and investment, is vital to encourage a shift to low-carbon energy, transport and agriculture. “We know we need to burn less fossil fuel, but when taxes on the most polluting fuels are zero or close to zero, there is little incentive to change,” said OECD Secretary General Angel Gurria. In fact, taxes on coal, which is responsible for almost half of CO2 emissions from energy, are zero or close to zero in most countries.
Across the 44 countries studied by the OECD, 97 percent of energy-related CO2 emissions outside of road transport are taxed far below levels that would reflect damage to the environment. Only four countries (Denmark, the Netherlands, Norway and Switzerland) tax non-road energy above EUR 30/t CO2, considered a low-end estimate of the costs to the climate of carbon emissions.
The flip side of such tax situations in many countries today points to significant upside potentials that can be brought by improving tax policy. If carefully designed and implemented, taxing polluting fuels is an effective way to curb emissions that harm the planet and the income generated can be used to ease the low-carbon transition for vulnerable households.
Another area where decisive actions by governments and businesses are urgently needed is accelerating the phase-out of fossil fuel power plants. Some countries are making progress in this regard. Germany, for example, has announced plans to phase out all coal power plants by 2038 and is already planning for worker retraining or early retirement schemes to ensure no one is left behind. According to the International Energy Agency, global investment in coal-fired power declined last year by nearly 3 percent to the lowest level since 2004, and final investment decisions for new plants continue to decline.
Global institutional investors play an important role in promoting this encouraging trend. Not only are they increasingly committed to sustainable development goals, but they are also keenly aware of financial risks associated with coal assets. Costs for alternative renewable energy sources, such as solar and wind, are falling at a faster pace than previously expected and at the same time, regulatory risks associated with fossil fuels continue to increase. The combination of these factors explains a growing number of investors and creditors withdrawing their financial involvements in coal projects.
Despite this positive trend, however, the IEA reports that the current phasing out of coal power is behind schedule. Global coal power generation increased 3 percent in 2018, and for the first time crossed the 10,000 terawatt hours mark. Growth was mainly in Asia. Japan, in particular, has remained one of the largest exporters of coal plants, mainly to Asian countries.
Recently, a few Japanese investors, such as Daiichi Life Insurance, have announced that they would divest from projects financing for new international coal-fired power plants. The global capital markets need to continue to exert pressure by highlighting the risks of stranded assets and reduced future returns on such investments going forward.
Thunberg is 16 years old and too young to vote. An important wake-up call for adults, however, is the fact that young people like Thunberg are capable of shaking and shaping policies by sending powerfully passionate and unfeigned messages to a global audience that would not otherwise pay enough attention to climate change, even though it is clearly one of the greatest crises that humankind has ever faced. It is time for grownups to listen to children.
Yumiko Murakami is head of the OECD Tokyo Centre, where she engages in policy discussions between the OECD and governments, businesses and academia in Japan and Asia, covering a wide range of economic policy issues. This column reflects the author’s opinion and not that of the OECD.
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