Saudi Arabia

Climate protection as a potential engine to fuel economic growth

Jan 26, 2016

The series of events “Talk Sustainability” takes place on a regular basis, giving BASF employees the opportunity to discuss current sustainability issues with different guest speakers. The 2016 series was launched by Professor Ottmar Edenhofer, a renowned economist and climate expert who was invited to Ludwigshafen in January. We spoke with him about climate protection and economic growth, the UN conference on climate change in Paris, and the role of the chemical industry.

Professor Edenhofer was invited to Ludwigshafen in January.

Professor Edenhofer, a global agreement on reducing climate change was negotiated late last year at the United Nations Climate Change Conference in Paris with the aim of reducing global warming to less than 2 degrees. What is your assessment of this agreement?

The Paris agreement means that we have managed to get our foot in the door. But the door is just about to slam shut. Over the last ten years emissions levels have risen more than ever before. If we don’t put a rapid stop to our dependence on fossil fuels, and especially coal, then either the 2-degree target will become very expensive or technologies will be needed on a large scale to remove CO2 from the atmosphere.

What instruments would you say are currently available to put a global climate policy effectively into practice?

Right now we are essentially using the atmosphere as a dump for our emissions, free of charge. The dump is filling at a relentless pace. By introducing a global price per ton of CO2, we could restrict the use of this limited space. A price for CO2 emissions would work in three ways. First of all it will make technologies that do not emit CO2 more economical, such as renewable energies. Second, it will make the use of fossil fuels more expensive, which will help to rein in emissions over the long term. Third, it will generate revenue that can be used for things like structural or innovation projects. To provide special support to developing countries, the price system can also be combined with transfer payments from the Green Climate Fund of the UNFCCC.

Won’t additional costs have a negative effect on the economy?

An abandonment of growth would certainly be the most expensive way to protect the climate. Our targets can be met at a much lower cost with the help of innovations. So the real question should be: what type of growth do we want? A global price for CO2 emissions gives us a framework that encourages investment in low CO2-emitting technologies. That turns climate protection into an engine to fuel economic growth. Moreover, we can use the revenue from the CO2 tax to promote long-term locational security and economic growth by means of targeted investments in areas such as education and infrastructure.

What role do you see for companies like BASF in the future, also with respect to competitive strength?

A mandatory and commensurable global price for CO2 emissions is crucial in order not to skew the conditions for competition. That being said, we need to introduce a price for example at the level of the Group of Twenty (G20) including the biggest industrial, developing and emerging countries, as soon as possible. Of course it is also important, especially for energy-intensive industries, that this price is foreseeable and that it can integrated into long-term planning.

The success of decarbonization, meaning lowering the use of fossil fuels especially in the power and transportation sectors, will depend on whether we can achieve a very high level of innovation. I see a very important role here for the chemical industry, which has consistently demonstrated a high capacity for innovation in the past, in areas such as battery technology and power storage. I hope that BASF will continue to work in these fields.

About Professor Ottmar Edenhofer

Professor Ottmar Edenhofer is an economist, theologian, and philosopher. He is a professor of the economics of climate change at the Technische Universität Berlin. He is also the deputy director and chief economist at the Potsdam Institute for Climate Impact Research, where he leads the domain on sustainable solutions which focuses on the economics of atmospheric stabilization. In addition, he is the director of the Mercator Research Institute on Global Commons and Climate Change (MCC).

He has advised the German federal government on numerous occasions as a member of various committees, and from 2008 to 2015 he directed the “Mitigation of Change Prevention” working group for the Intergovernmental Panel on Climate Change.

Birgit Hellmann
Global Sustainability Communications