Engineering climate debt: temperature overshoot and peak-shaving as risky subprime mortgage lending

ABSTRACT

Despite the ambitious temperature goal of the 2015 Paris Agreement, the pace of reducing global CO₂ emissions remains sluggish. This creates conditions in which the idea of temperature ‘overshoot and peak-shaving’ is emerging as a possible strategy to meet the Paris goal. An overshoot and peak-shaving scenario rests upon the ‘temporary’ use of speculative solar radiation management (SRM) technologies combined with large-scale carbon dioxide removal (CDR). Whilst some view optimistically the strategic interdependence between SRM and CDR, we argue that this strategy comes with a risk of escalating ‘climate debt’. We explain our position using the logic of debt and the analogy of subprime mortgage lending. In overshoot and peak-shaving scenarios, the role of CDR and SRM is to compensate for delayed mitigation, placing the world in a double debt: ‘emissions debt’ and ‘temperature debt’. Analogously, this can be understood as a combination of ‘subprime mortgage’ (i.e. large-scale CDR) and ‘home-equity-line-of-credit’ (i.e. temporary SRM). With this analogy, we draw some important lessons from the 2007–2009 US subprime mortgage crisis. The analogy signals that the efficacy of temporary SRM cannot be evaluated in isolation of the feasibility of large-scale CDR and that the failure of the overshoot promise will lead to prolonged peak-shaving, masking an ever-rising climate debt. Overshoot and peak-shaving scenarios should not be presented as a secured feasible investment, but rather as a high-risk speculation betting on insecure promises. Obscuring the riskiness of such scenarios is a precipitous step towards escalating a climate debt crisis.

Key policy insights

• The slow progress of mitigation increases the attraction of an ‘overshoot and peak-shaving’ scenario which combines temporary SRM with large-scale CDR

• Following the logic of debt, the role of CDR and SRM in this scenario is to compensate for delayed mitigation, creating a double debt of CO₂ emissions and global temperature

• Using the analogy of subprime lending, this strategy can be seen as offering a combination of subprime mortgage and open-ended ‘line-of-credit’

• Because the ‘success’ of peak-shaving by temporary SRM hinges critically on the overshoot promise of large-scale CDR, SRM and CDR should not be discussed separately

KEYWORDS:

• Geoengineering
• solar radiation management
• carbon dioxide removal
• temperature overshoot
• peak-shaving
• climate debt

Acknowledgements

We are grateful to Rob Bellamy, Holly Buck, Oliver Geden, Anders Hansson and Nils Markusson for their thoughts on an early version of the article. We also thank three anonymous reviewers and the journal editor Joanna Depledge for their careful readings of our paper and helpful comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Shinichiro Asayama http://orcid.org/0000-0001-6817-3862

Mike Hulme http://orcid.org/0000-0002-1273-7662

Notes

1 This difference in the size of carbon budgets is caused by the lagged response of temperature to CO₂ decline during the transition from positive emissions to negative emissions, which is mainly due to ocean thermal inertia (Macdougall et al., 2015).

2 Lien is the legal right that a creditor can have a claim to seize the debtor’s collateral property when a debtor fails to meet the obligations of a loan. A home-equity loan or line-of-credit is often considered a ‘second mortgage’ or ‘second-lien loan’ using home as a collateral, a debt that places its holders second in line to be repaid in the case of default.

3 Note that the interest on ‘mortgage loans’ defined here is not the same as the interest associated with the ‘emissions debt’ discussed previously. This is because the definition of ‘principal’ in each case is different. For emissions debt, the principal is the ‘excess emissions over the target’s carbon budget’. For ‘mortgage loans’, since we use the current pathway as our baseline case (see Figure 2(a)), the principal is the ‘cumulative net-positive emissions gap with current pathway’. The difference in the total mortgage repayments (including the loan interest) between the overshoot and non-overshoot scenarios is then equal to the amount of the interest on the emissions debt, i.e. the difference between the net-overshoot and conventional carbon budgets.

4 There are always ‘residual non-CO₂ emissions’ from some greenhouse gas sources (e.g. CH₄, N₂O), which require to some degree net-negative CO₂ emissions to compensate for non-CO₂ forcing and stabilize temperature, even in non-overshoot scenarios (Rogelj et al., 2015; Holz et al., 2018; Obersteiner et al., 2018).

5 Of course, the reasons why the subprime mortgage crisis in the US housing market triggered the global financial crisis are rather more complex (see, for example, Acharya & Richardson, 2009; Gorton, 2009). Note that our analogy is not intended to capture the full picture of either crisis.

Additional information

Funding

Shinichiro Asayama was supported by the Japan Society for the Promotion of Science through its Grants-in-Aid for JSPS Research Fellow [17J02207].