“I think the reason the banks and asset managers are pledging to net zero is because they know this is an area where the demand is going to be,” Kerry said in an interview on Friday. “And they believe they’re going to be able to invest and make money.
That message fits with one of President Joe Biden’s consistent climate themes. The green transition will generate millions of jobs and trillions in investment opportunities, all of which can be shared around the world. The second day of the summit brought together executives, labor leaders, bankers and technology developers. There was consensus that fighting climate change can bring about an economic boon, marking a big shift from the recent past in which shifting to clean energy has been dismissed by many as simply too expensive.
In fact, Kerry stressed in the interview, the cost of ignoring the climate crisis is now higher than the cost of fighting it. And the benefits are increasingly obvious. As he told participants at the summit on Friday: “The world’s largest market in history is opening before our eyes.”
Kerry sat down Friday afternoon with Bloomberg to discuss the climate summit and assess the ways nations are starting to embrace the idea that climate action is an advantage rather than an expense. He made headlines by emphasizing President Biden’s interest in adopting a border adjustment tax, something the European Union plans to use to impose tariffs on imports from places weak climate policies.
The following interview has been edited and condensed.
Thank you for joining us at the end of two long days. What do you think was accomplished?
The world came together in a rather extraordinary fashion. About 55% of global GDP committed to try to hold the Earth’s temperature increase to 1.5 degrees, which is critical because that’s what the scientists say we have to do to avoid the worst consequences of climate.
We also had an upping of ambitions among many nations. Japan stood up and said, “We’re going to reduce our emissions by 45% to 50%.” You had a host of countries say they’re going to try to do more, they’re going to put out plans over the course of the next few months before the November Glasgow negotiation [at the COP26 climate conference].
I think it’s very significant that everyone talked about the crisis of climate. There’s no avoiding it. It’s a global challenge.
You got some remarkable financial commitments from some of the big banks and other financial institutions.
Financial institutions are going to increasingly be called upon to be accountable for their long-term vision for the investments that they’re making and the risks that are involved. Banks and financial institutions are allocating a certain amount of investment over the next years to climate investment. You have Bank of America and Citi and others saying they’re going to put about $1 trillion over the course of the next 10 years, minimum. That’s a floor. And the reason they’re doing it is because it’s profitable. This is where the market is moving. There’s an enormous interest in hydrogen fuel, in battery storage, in carbon capture.
These are the technologies that are going to to have go into place to avoid the worst consequences of the climate crisis. And I think the marketplace is already moving there. You’ve seen it move on coal, which is now more expensive than alternatives and renewables. There’s $4.16 trillion from major banking institutions that’s going to be invested in this sector, and I think it’s going to create even more investment in that sector and in others.
President Biden said we’re going to halve U.S. greenhouse gas emissions by 2030. That helps reestablish the U.S. as a climate leader. But we’re not going to be able to get done what we need without China and without India. What do you say about the fairness argument? They say industrialized nations had the benefit of all those years, and now they’re trying to impose limitations.
What one has to point out is that planet Earth and the atmosphere doesn’t measure who began when. It doesn’t measure who is doing it now. It measures the total amount of CO2. China has as much interest in reducing these emissions as we do.
China is 30% of the world’s emissions. We’re 15%. And if you add Europe, we’ve got more than 55% of the world’s emissions right there. Twenty countries equal 81% of the world’s emissions. Those 20 countries are going to need to step up and cut emissions at the rate that’s commensurate with what the scientists are telling us we need to do. This is not politics. It’s not ideology. It’s two and two is four. The scientists are telling us this is exactly what’s happening and this is why it’s happening, and if you don’t reduce by more you’re going to be paying a hell of a lot more money to clean up after this.
A few years ago we had three major hurricanes—Irma, Maria and Harvey. They ended up doing something like $260 billion of damage that we paid out just to clean up after the storms. The economists will tell you we’ve reached a point in the climate crisis where it’s more expensive not to do something than it is to do something.
We need to be responsible. We need to get this done. Most people will tell you it’s existential. If you don’t do it there are going to be profound impacts on our planet, beyond what we’ve already seen in terms of fires, mudslides, floods, drought, melting of the icecaps, rising of the sea level. We’re inviting disaster if we don’t respond.
And in the response there’s a remarkable amount of energy in economic terms. There’s a huge, exciting economic future on the other side of this transition. That’s from building out transmission lines, the grid, deploying renewables, chasing hydrogen fuel, or any of these other things. New products are going to come online and some of them are going to make an enormous difference.
What can the government do to encourage the private sector? A carbon price or a carbon tax? Or a border-adjustment tax?
There are a lot of advocates in Congress for pricing carbon. There are different thought about how to do it.
Biden is particularly interested in evaluating the border-adjustment mechanism. He wants to see if that’s something we need to deploy. Europe is already looking at that, and they may end up deploying it if they don’t get satisfaction from China and other countries with respect to the transition off of coal and their efforts to do their part in reducing emissions.
There’s also a concept called “common but differentiated responsibilities.” Because the more developed nations were ahead of everyone else and the developing nations needed a certain amount of room to be able to move, there was this notion that there was a common responsibility to deal with climate but a differentiated response.
That’s increasingly disappearing, in the sense that those other countries can leapfrog and go immediately to deploying these new technologies, but they need finance and help to be able to do that. One of the things that banking institutions can do is help leverage different behavior from some of these countries by saying we have money ready to invest but you’ve got to do the following things in order for us to be able to do it.
You have either blended finance or other mechanisms to lower the risk, and make it more attractive to private capital to be able to cut a commercial deal. This is where government can be helpful. There are other incentives that can be put in place. Even with President Trump and a Republican Senate, they did extend the tax credit for solar and that’s had a profound impact on helping to deploy much more solar in America. Even after Trump pulled out of the Paris Agreement, you saw emissions reduced in America. You saw 37 governors continue to live by the Paris Agreement, Republican and Democrat alike. And you also saw more than 1,000 mayors of both parties who drove their cities to try to live up to the Paris Agreement.
I think this is here to stay. The economic power of the capital investments that are going to take place is something that no politician could reverse. It’s not ideological. It’s not a party label. It’s happening because of supply and demand in the market. I think it’s inevitable.
Now we have to take the words that were spoken at the summit and go sit down with those countries.