In the desolate search for good news on the global warming file, Canadians should take some comfort from the United Nations’ naming of Mark Carney as its next special envoy on climate.
But not too much.
Carney, who oversaw Canada’s central bank from 2008 to 2013, has established himself as one of the world’s top policy-makers on climate finance, using his perch at the Bank of England to make the case — and inspire legislation — for companies to come to terms with their impact on global warming.
He will take the pro-bono part-time job at the UN starting in January and aims to use the bully pulpit to spread his aggressive and clear-eyed approach to reconciling climate and business. He’ll also be moving back home to Ottawa, where his influence will resonate loudly.
For Canadians hoping to see the federal Liberals deliver materially on their election commitment to make Canada a net-zero producer of emissions by 2050, Carney’s appointment is an opportunity to leverage ideas and implement them with haste.
But before we get too comfortable with that thought, we need to recognize that his ideas on climate finance and climate leadership are ambitious — and are much easier said than done in a country that is so dependent on fossil fuels for its economic growth.
Carney’s own statement, released after UN Secretary-General Antonio Guterres announced the move on Sunday, says volumes, albeit in stiff central-banker-speak. He described his mandate: “This provides a platform to bring the risks from climate change and the opportunities from the transition to a net-zero economy into the heart of financial decision-making.”
And he laid out his challenge to policy-makers and business: “To do so, the disclosures of climate risk must be comprehensive, climate risk management must be transformed, and investing for a net-zero world must go mainstream.”
For some parts of Canada’s decision-making spectrum, those words will be encouraging. They validate some nascent thinking at the Bank of Canada, the financial service regulators and even parts of the oilpatch that global warming is a deeply disruptive and unquantified risk to profits, investment, supply and demand as we know it.
The central bank is researching the risks and is looking at a framework to stress-test Canada’s financial system to see how much climate risk it can handle. There is some talk amongst regulators how to make sure companies are ready to deal transparently with the damages. And some in the oil and gas sector are actively disclosing their exposure, making a marketing virtue out of investing in ways to transition to a low-carbon economy.
But as a national economy, we are in kindergarten and Carney is a PhD.
We are a long, long way from “investing for a net-zero world” both in terms of government money and policy and in terms of private-sector capital.
That’s partly because investing for net-zero would mean massively disinvesting in much of Canada’s oil and gas sector at a time when a low oil price and lack of market access is already pummelling the Prairie economy. On the political front, legislating net-zero and the steps along the way will provoke those provinces’ leaders and business sectors, and also require a major overhaul of the mindset of financial markets and consumers alike. For now, it’s a promise without a plan.
Could Carney be a galvanizing force in Canada? Perhaps. He has oodles of credibility for his thinking on climate finance, not just in Canada but around the world.
He will have his hands full with the largest of global emitters, the United States and China. They are in the midst of a bitter trade war. China is taking large leaps in financing emissions reductions but is also increasing its coal consumption to keep pace with industrial growth. And the United States is loosening up its climate requirements even as the warming climate demands moves in the opposite direction.
But Carney will have more than a UN pedestal. He is backed by big money and growing authority.
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Trillions of dollars controlled by some of the world’s largest institutional investors — mainly in Japan and Europe — are in the midst of shifting toward companies that embrace transition to a low-carbon economy. Many central banks and financial regulators around the world are far ahead of Canada’s, getting ready to impose stress-testing, transparency requirements and disclosure of risk.
But most of all, he is backed by logic. Climate finance, if embraced at scale and with ambition, can take us a long way toward grappling with global warming. The corollary is also true, and that’s cold comfort.