Ocean warming: Possible consequences and responsible action

Round table discussion, moderated by: Dieter Aigner, Managing Director, Raiffeisen KAG with the Experts

• Professor Leopold Haimberger, Department of Meteorology and Geophysics, University of Vienna

• Michaela Krömer, attorney-at-law specialising in fundamental and human rights, the climate crisis, and migration

• Gabriel Panzenböck, Fund Manager in Rates & FX Team, Raiffeisen Capital Management

• Philipp Stadler, Head of CCU Team, Net Zero Emission Team, Rohrdorfer

Dieter Aigner: Professor Haimberger, climate change is something that really cannot be denied anymore: For example, floods around the world, recently even in Africa, and hailstones the size of tennis balls are no longer just figments of filmmakers’ imagination. More and more, they are a quite unpleasant reality, even here in Austria. As a meteorologist, you get to see the increasingly obvious signs of climate change up close and personal. What role do the oceans play in these wild weather conditions?

Leopold Haimberger: The role of the oceans is to establish a balance between the tropics and the polar regions. And, very importantly, they also function as a massive energy sink. Due to the high concentration of CO2 here on Earth, we have a surplus of energy. This means that, in net terms, the planet is being heated up. And more than 90% of the energy goes into the oceans. If there weren’t any oceans, the global temperature would probably already be one degree centigrade higher than it currently is. Because the oceans absorb the energy and mix it into deeper layers. This holds true both for energy and warming, but also for carbon dioxide as well naturally. The oceans absorb roughly one quarter of the additional carbon dioxide that is being emitted. And that brings us to the real problem. Because if the oceans keep warming up, their ability to store CO2 declines. We cannot rely on the oceans continuing to be such an effective sink for CO2. As for the unpredictable weather, heavy precipitation events will keep intensifying with warmer oceans. They may not necessarily occur more frequently, but if weather conditions are right for this kind of precipitation, then these events will be more intense in many parts of the world.

What will happen, since it does appear likely to indeed occur, if global warming exceeds two degree centigrade and continues on to three or even four degrees or more?

Leopold Haimberger: People are always talking about reducing CO2 emissions. The fact of the matter is, however, that we are well on the way to exceeding two degrees. The radical measures being talked about are not materialising. And if CO2 emissions continue to rise, then we cannot rule seeing an increase of three degrees or more. This means that sea levels will rise dangerously; we’re talking about several metres in this case. That said, the real effects will only be seen after 2050 or even after 2100. This will impact an unbelievable amount of land and a very large proportion of the world’s population. We should not underestimate this. Over the short term, over the next 20 years, this will not impact us here in Austria, and as a land-locked country it won’t have much effect on us anyway. But rising sea levels are a major problem.

One hears the expression “tipping point” in the media a lot. What does this refer to?

Leopold Haimberger: For example, there are worries that the Amazon rainforest could become unstable, burn down, and not be able to regenerate itself. This also applies to forests in other regions, where forest fires are already becoming more frequent. Naturally, this is a problem, because the forests in Russia and Canada store a great deal of CO2. And if forest fires continue to increase, then this CO2 storage function will decrease substantially. The oceans are incapable of storing the CO2 all on their own.

Ms Krömer, in April the so-called Swiss Climate Seniors' Association won a case before the European Court of Human Rights that Switzerland was in violation of the European Convention on Human Rights due to its overly lax climate protection measures. These climate cases are intended to force Europe’s states to take stronger measures to fight the climate crisis. How important is this ruling for climate protection?

Michaela Krömer: At the international level, we’re seeing a trend towards more and more climate-related legal proceedings ending with positive rulings. And since we are actually talking about the oceans... Just a few weeks ago, the International Tribunal for the Law of the Sea issued an advisory opinion in which greenhouse gases constitute pollution under the UN Convention. This opens up new avenues for lawsuits. We are also anticipating other opinions at the international level, and climate-related lawsuits are having more and more success in many countries. This is a positive development, but also a negative one, because it shows how grave the situation is, insofar that legal intervention is actually necessary. The courts often lag behind and they are often hesitant about intervening, with an eye to the separation of powers. But we are now seeing space open up, because states are completely petrified. Looking at the regulatory frameworks, it is clear that the reality they see is completely different from what scientific community is telling us.

Are the courts taking over the responsibilities of the state?

Michaela Krömer: No, courts can only intervene in cases where rights are violated. However, they are increasingly required to intervene due to national climate policies which are far too relaxed.If one listens to Mr Haimberger and does the math, it is clear that 2100 is just 75 years away, which means that my 4-month old son may experience a world that is three degrees warmer, with all of the serious consequences. If we all had a life expectancy of 200 years and it was clear that all of this was going to happen to us personally, then we’d probably be demanding more from the politicians. And politicians would probably not be afraid to take the necessary measures. With the result that the courts would not have to intervene so much.

What is the situation in Austria? Have there been any such rulings?

Michaela Krömer: In Austria, it’s difficult right now, because we don’t have the tools to file cogent cases. But the international developments are cause for hope. Fundamentally speaking, the law always consists of two parts: substantive law and the opportunity to enforce it. And in Austria, we have a gap in legal protection in the field of climate protection. For formal reasons, we cannot resort to the courts. Right now, there is another case before the Constitutional Court which was brought by children and should be decided soon. Despite the ruling in favour of the Swiss Climate Seniors' Association, I do not believe that the Austrian courts will take a new, innovative approach in relation to the children, as children’s rights are separate fundamental rights. There has also been an ongoing case against Austria before the European Court of Human Rights for the last three years. Similar to the ECHR ruling on Switzerland, this will have to result in some stronger activity in this regard. Nevertheless, positive rulings by the courts are always just one part of the puzzle and never the solution to the problem.

At the moment, the climate movement is feeling some headwinds, because there are some topics that are felt to be possibly more important, such as the war on the edge of Europe, China’s economic dominance, etc. Do you also get this feeling?

Michaela Krömer: Yes, the challenges are tangible. Climate researcher Helga Kromp-Kolb once said in a discussion we had: “The monster fights back before it dies.” It’s a real danger. I think one has to take the climate movement, which is now occurring in various different professional areas, more seriously. Those of us who want to see changes have to be careful that we don’t get constantly distracted and consequently don’t approach the issue in such a unified manner as we could. The “other side” is often very well organised. We have to hold our own. And there are now a lot of people in different professions who are interested in achieving the transformation. We cannot allow ourselves to be convinced that we are not able to do so.

Speaking of transformation, the cement industry is one of the most resource-intensive industries of all, and it is under intense pressure, from investors as well, to reduce its CO2 emissions. Mr Stadler, can you tell us what’s going on in this regard?

Philipp Stadler: As the father of two children, I also think about the future and it motivates me to push for change. Right now, the cement industry is responsible for 7% of the CO2 emissions. Cement is a key building material of the future, but it comes with a CO2 burden of 500 kg/tonne. A large part of these emissions come from the raw material, the limestone, and these emissions are generally seen as being unavoidable. So, how can we reduce the emissions to net zero despite this? This is a big challenge, but it is absolutely feasible. We can cut 60% of the emissions by using alternative raw materials with less CO2, by changing the composition of the cement and the concrete, and by shifting fuel use towards biogenic and renewable fuels. The rest of the unavoidable process emissions can be decreased to zero by way of carbon capture, use, and storage. At Rohrdorfer, we are already taking the necessary measures to move forward with decarbonisation. For example, three years ago, we started operating a carbon capture and utilisation system; we are also developing a process to transform CO2 into compounds such as formic acid, and we are scaling these new technologies in all areas. Furthermore, we have launched projects to boost efficiency and avoid CO2 emissions. As a result, our carbon footprint is already now smaller than it was ten years ago. We have a clear roadmap for the future: By 2038 we want to achieve net zero, meaning that we will produce high quality cement and construction materials which are climate neutral. To get there, Rohrdorfer is taking a proactive approach and has pooled all of its competencies in the Net Zero Emission Labs, with 25 experts working on the subject of CO2 reduction.

Net zero by 2038 sounds very ambitious. Can you achieve it?

Philipp Stadler: Yes, but there is still another thing we have to change: Right now, we are still a fossil company and we are still dependent on oil and gas, which is imported to Austria to generate energy. We have to put an end to this and transition to renewables. We need pragmatic solutions in order to be able to do this. And to meet the climate obligations, we have to be open to technologies that are currently still viewed with some scepticism, such as underground CO2 storage. We have to make this possible in Austria as well, because otherwise we will not be able to achieve these ambitious goals.

Of course, this has implications for infrastructure as well...

Philipp Stadler: Yes, we have to work on expanding the power grid and push forward with renewables. The second point is the transition from natural gas to hydrogen. To achieve this, capacities must be expanded, and it is possible that new pipelines will have to be built. We need CO2 pipelines to transport the greenhouse gas from the point of emission to the hubs, so that it can be reused or stored. If these measures are carried out quickly, we can become carbon neutral. I’d also like to briefly add something to what Ms Krömer and Mr Haimberger said. We can also see that in relation to this subject there are sometimes efforts to distract attention to other issues that are not relevant at all. We need pragmatic solutions. We are frequently hindered by the regulatory framework. We support utilising CO2 as a raw material and transforming it into things that we can use in everyday life. In doing so, we can close the carbon cycle and we would become carbon neutral. But at the moment, the regulator does not foresee this kind of transformation. Sometimes one cannot help but get the feeling that climate regulations are made very quickly, but that what is needed to actually implement them is not provided politically. In our case, we are not going to wait any longer for the legal situation to change, and we assume that the law will catch up later.

Returning to the subject of the oceans: What role does ocean warming play for fund management?

Gabriel Panzenböck: As participants in the capital markets, we are often seen as a problem, as part of the monster that was mentioned earlier. From an economic perspective, overall we are faced with the classic prisoner’s dilemma: The problem is that CO2 is being emitted into the atmosphere at the global level, while at the same time individual counties have little incentive to change anything as long as the others don’t. The investment industry is just one part of the overall solution. On our own – without political backing – we won’t be able to achieve that, just as is the case with the courts or individual enterprises. But the facts of the matter are so clear-cut and so blatant, that from our perspective as investors it is clear that only regulatory pressure, and regulatory changes in decision-making processes will lead companies to be ready to do something and ready to move ahead in the right direction with innovation, which also represents better investments.

What industries and regions are impacted by the consequences of the climate crisis in the oceans?

Gabriel Panzenböck: If individual companies try to still earn something with fossil CO2, they still might be able to do so in 2024. But there is mounting pressure in the public sphere and society to change our economic system more intensively and more quickly. As a result, an investment is more lucrative for us when we invest in companies that position themselves for climate protection earlier and more effectively. And this is becoming prevalent in many sectors. Because climate change and rising sea levels affect a very large number of sectors, for instance the food industry, in relation to the subject of food security. Or if we look at it from a regional perspective and think of the migration flows, which lead to changes in the labour market. Companies that are well prepared in this regard and are ready for future developments will perform better than others. We are lucky that the economic pressure is pushing us in this direction. Solar and wind energy are now the cheapest forms of energy and at the same time they are CO2-free. That helps us move forward. So, there is a real chance that we have the peak levels of CO2 emissions behind us, not only in Europe, but in China as well. One thing is clear: Pragmatic solutions need to be financed, but it must be possible to present the transformation process, showing what can logically be achieved in realistic timeframes. And it is important that more happens, not less.

Leopold Haimberger: China is a good example. We complain that we are being flooded with cheap solar panels from China. A few years we were complaining that our solar systems were too expensive. China made the decision to provide massive support for solar and wind energy. Our governments are called upon to offer conditions for companies here so that they are competitive and can pursue new opportunities. The EU does a lot by international standards, but we are seeing that other countries are reacting even more quickly.

Gabriel Panzenböck: One should not forget that the European solar industry, in particular Germany, was once the world market leader. Back then, there was a lot of support behind it. The good news is that the economic pressure of technical innovation is pushing us in the right direction for energy systems. For example, we see this with electromobility. And this highlights the interdependence, namely that we have to pay attention and that we have to create the right incentives in steering innovation – and governments and democracies play a big role in this regard – so that things move in the right direction. This is strongly intertwined with the regulatory framework, which is incredibly important in this regard. For example, it starts with how much one is required to install a solar system when building a new house. Regulation is critically important, and failures in this regard cannot be solved by the courts.

What pillars are needed so that ultimately everything doesn’t end up going to the courts?

Michaela Krömer: As mentioned, regulation is still needed at many different levels. Along with power grid expansion, there are some things that were already in the pipeline, for instance the Renewable Heat Act, which didn’t end up like we would have needed it to. For a long time we’ve been talking about a Climate Protection Act which has established greenhouse gas targets and includes a solid catalogue of measures that can be legally enforced. We are talking about getting rid of subsidies that are harmful for the climate. There are still a large number of subsidies in the field of fossil energy, and for example we are conducting gas exploration on a scale that would cover 30 wind turbines. The heated discussions about solid wind turbine projects is also absurd to some degree, along with the resistance to carbon capture and storage.

How can we move forward more quickly with these demands?

Michaela Krömer: Right now, these demands are mostly coming from the “usual suspects”, and unfortunately these parties are not taken seriously enough by the politicians. We need more breadth and companies which are willing to stand up and demand these things. For example, to say: We’ll pay a higher CO2 price, give us clear bans, but don’t regulate us so heavily, we need room for innovation. It’s important that other players now get involved in these discussions, in addition to the environmental organisations and NGOs, so that the pressure increases. If we were still back in the 1970s, we could take a different starting point. But it’s 2024 and we are under enormous time pressure. We have act pragmatically and quickly and adjust more quickly as well. Because we are probably not going to be able to get back to a world that’s like we want it to be.

Mr Stadler, do you see resistance in your process of transformation?

Philipp Stadler: Yes, we do experience this resistance and we see a lot of stubbornness in society in the public discussions. In part, this resistance is motivated by worries about the future. That’s understandable. If we want to reduce our CO2 emissions, then we have to transition to a system of renewables, make green electricity cheap, and put a price on CO2. This leads to a quick transition by industry and society to carbon-neutral processes, like the ones we are implementing now at Rohrdorfer. I’m an optimist. We will achieve this transition and until we have done it we need good pragmatism, which is a big challenge for all of us. Industry is ready move in this direction. The people behind this also have kids and they want their kids to grow up in a good world. We are ready to move forward with decarbonisation and achieve net zero.

Leopold Haimberger: We have to stay focused and cut CO2 emissions wherever we can. Leave the car behind and take the train. That might not sound like much, but every little bit counts and helps to preserve our planet for our children and grandchildren.

Gabriel Panzenböck: Change is going happen, that’s clear. 30 years ago a lot of things would have been easier to change in the system. But we can still make changes today as well. A lot of things are moving in the right direction, even though the pace of progress is not quite as fast as we want it to be. There is always the vision that our salvation will come from technology. And I do believe that technology will actually save us. It won’t be flying nuclear-powered cars, however. It’ll be wind turbines, batteries, and solar systems. But these three developments are cheap enough and so well technically developed that from now onwards we have a chance to achieve the scenario mentioned by Professor Haimberger, in which we may get a black eye, but we won’t have to face the scenario of sea levels rising by several metres.