Add green to the dollar

Unusually, the six largest banks in the US united and called for a climate agreement in Paris and the creation of "carbon pricing" - a mechanism that would reflect the damages of greenhouse gas emissions in product prices

By: Dr. Daniel Mader, Zwata - Science and Environment News Agency

In recent days, almost without our noticing, an economic revolution has taken place. In a statement issued on In a statement issued on September 28 The six largest banks in the United States demanded in a loud voice that a significant climate agreement be reached in Paris this coming December, and moreover, they even demanded the creation of mechanisms for "carbon pricing" - mechanisms that would reflect in the prices of goods the cost of the damages caused by greenhouse gas emissions in the production of those goods.

The banks are the four largest commercial banks in the United States: JP Morgan Chase Bank, Bank of America Corp., Wells Fargo, and Citibank; as well as the two largest investment banks in the country: Goldman Sachs and Morgan Stanley. Together, these banks manage nearly $8 trillion in assets and accounts. These banks have pledged to provide significant resources to promote solutions to climate change problems.

A dramatic message

This coming December, the United Nations will hold a climate conference in Paris with the aim of formulating an agreement, under which most of the countries responsible for emitting the majority of greenhouse gases in the world will commit to significant reductions in greenhouse gas emissions in the coming years. The goal is to slow down or even stop the climate change that has been taking place for the last 150 years, and hopefully reduce or prevent the damage that is already occurring as a result of climate change.

Traditionally, America's major banks have supported the financing of the traditional energy industry that relies on coal, oil and gas, and have been less supportive of renewable energies. The change in their position apparently did not happen overnight: the banks acknowledge the accumulated scientific evidence that proves that climate change is indeed occurring, causing damage and endangering the global economy; They see customers moving towards investments in clean energy - a market that is growing exponentially (exponentially, very quickly); And in other words, the banks being banks simply look at their profit line. The banks understand that there is now a business opportunity to build a sustainable economy that is poorer in greenhouse gas emissions, as well as the ability to reduce risks arising from climate change - and they must accelerate this transition. A significant and clear climate agreement will allow them to change their investment and lending policies in an informed and long-term stable manner.

The United States is not alone

The call of the six American banks joins the call of major banks in Europe, as for example in the words of Kai Koch-Wasser, vice president of Deutsche Bank, at the innovation and sustainability conference for the climate conference in Paris 2015, which was held in Tel Aviv last July. Koch-Wasser predicts that companies ignoring the transition to low greenhouse gas emission energies, and continuing to focus on the use of fossil fuels, will result in the creation of a carbon bubble in the global economy. The intention is that in light of the meteoric development in the field of renewable energies, the prices of fossil fuels are expected to drop thanks to the transition to the use of renewable energies. These price drops, combined with carbon pricing, for example, will cause companies that invest in fossil fuels to lose a lot of money because they will not be able to sell these fuels, or will be forced to sell them at very low prices. Since many companies today deal exclusively with fossil fuels, they could collapse if this prediction comes true.

An example of such a case was published on the very same day that the announcement of the American banks was published, in which the oil giant "Royal Dutch Shell" abandoned a venture to search for and produce oil in Arctic Alaska, which lasted 9 years and cost about 9 billion dollars. The company did this because of a two-year low in oil prices. There are several non-environmental reasons for this current slump - including the abundance of natural gas that is slowly taking the place of oil, the slowdown in Eastern markets and the expectation of a large amount of Iranian oil that will flood the market once the sanctions end. Still, it seems that the global transition to the use of low-greenhouse gas-emitting energies also plays a part in this.

These statements from the banking sector come after a revolutionary statement of a similar magnitude in June of this year, in which the major oil and gas companies called for carbon pricing (!) and a clear and stable policy on the subject, in order to create certainty in the market.

More labor, less carbon

Carbon pricing is a mechanism whose purpose is to embody in the price of goods and services the external damage caused by carbon emissions (or more correctly - greenhouse gases). What damages? A rise in the sea level which bites into the beaches and damages buildings and infrastructure on the coastline, an increase in the frequency of severe storms, in the frequency of fires, damage to crops, an increase in the use of energy to cool buildings in areas that are heating up and more. The idea is that in this way, the higher price of products that cause significant greenhouse gas emissions will divert the use of these products to products with low greenhouse gas emissions, and investments in the development of low emission technologies. Thus, through the economy, greenhouse gas emissions will be reduced and it will no longer pay to emit greenhouse gases (unlike the situation today).

One such mechanism is a carbon tax, in which a tax is added to goods that reflects the damage they cause due to greenhouse gas emissions. Oil, for example, is subject to a high carbon tax, which reflects the emission of carbon dioxide from its combustion. A low carbon tax (if any) will be applied to solar energy, which will reflect the minimal greenhouse gas emissions that occur during the construction of the solar energy facility. Another mechanism is emission permits, where companies receive permits to emit greenhouse gases. This mechanism allows the trading of emission permits, and thus a company whose emissions are easiest or cheapest to reduce will do so and sell what is remembered to emit more greenhouse gases to other companies whose emissions are difficult or expensive to reduce. In this way, emissions should be reduced in the cheapest way. There are already over 1,000 companies that price their carbon emissions.

To date, very few US Republican politicians (who currently control the Senate and House of Representatives) have expressed support for carbon pricing, and most work against it. Most of the supporters are from the Democratic Party, but even among Democrats from countries where a lot of fossil fuel is produced there are opponents of carbon pricing - mainly because many factors in the American economy claim that carbon pricing will increase costs, lay off workers, close companies and ultimately slow down the economy. It is very possible that we will soon see more and more politicians daring to support carbon pricing, thanks to these major changes in the global economy.

Changing the order of priorities in the budget

Let's hope that Israel will learn from the American statement of intent and hurry to act in a similar way. The Israeli government's decision to reduce greenhouse gas emissions by 25 percent of the expected emissions in 2030 is not enough (in truth, it is about keeping our emissions at the same level as they are today). There is room for greater investments in the development of technologies to reduce emissions, for greater investments in reducing emissions in existing technologies, and for a change in priorities in the state budget.