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Global Powers Place Their Bids On Green Future, But Is It Enough?

There is increasing global competition to take leadership in the growing area of sustainable climate technologies, with different approaches in different regions. The names are different, but they are all about merging the global competition for green economy leadership with achieving sustainability targets.

Joe Biden’s ‘American Jobs’ infrastructure spending plan, the EU’s Horizon Europe research program and China’s focus on green finance are all important cornerstones for what is to come. At the time of writing, 51 countries have pledged climate neutrality by mid-century.

There has never been more public support for taking dramatic steps to avoid a climate disaster, while the cost of renewable energy solutions continues to fall. There is undoubted momentum in the green transition, but there is also a growing gap between the world’s climate ambitions and concrete action.

Bill Gates used to say we need to double global research and innovation efforts to reach climate targets. But in his latest book How to Avoid a Climate Disaster, he now talks in terms of quintupling effort.

It’s an opinion backed by a new report from the International Energy Agency (IEA). In Net Zero by 2050, the IEA states that “the pledges by governments to date—even if fully achieved—fall well short of what is required to bring global energy-related carbon dioxide emissions to net zero by 2050 and give the world an even chance of limiting the global temperature rise to 1.5°C.” It also advocates an immediate fourfold increase of innovation and demonstration efforts.

Biden bets big on infrastructure

While initially pitched as a major infrastructure investment, president Biden’s American jobs plan has major green ambitions too. Along with modernizing thousands of bridges, fixing highways and improving transit system, funding will also be used to improve insulation in buildings, air quality, limit greenhouse gas emissions, reduce congestion and renew the electricity grid.

Bloomberg stated that infrastructure packages are the “most durable of climate policies,” as the improvements made today will have an impact for decades to come. Unlike tax policies, infrastructure cannot easily be reversed.

The EU focuses on research

In the final weeks of 2020, political agreement was reached between the European Parliament and the Council on Horizon Europe, the largest ever transnational research and innovation program. Approximately 30% of the €95.5 billion ($117 billion) budget will be available for green technology research and development.

Could China take the lead with green finance?

Following international pressure, Chinese president Xi Jinping made a surprise carbon neutrality pledge last year. But achieving that pledge by 2060 will cost $21 trillion, according to a study from Tsinghua University. Cost is however a debatable term in these issues, as the cost of failure is extreme.

China seems set on using so-called green finance, defined as “the institutional arrangement that utilizes financial instruments such as green credit, green bonds, green stock indices and related products, green development funds, green insurance, and carbon finance, as well as relevant policy incentives to support the green transformation of the economy.”

So far, so good. China has become the world’s second largest green bond market after the U.S. in barely five years.

Christoph Nedopil Wang, senior research fellow at the International Institute of Green Finance of the Central University of Finance and Economics in Beijing, told the South China Morning Post that green finance can play two important roles: “First, green finance mobilizes and channels money into the low-carbon economic transition, particularly in green technologies and the improved energy and emission intensity of all sectors. Green finance also brings more transparency into the risks of non-green finance that financial institutions and investors need to deal with because of climate change.”

Short-term politics must be put to one side

The IEA report caused a splash in the media when first released, with a Time headline claiming it “rocked the energy world.” However, there’s been little coverage of the massive policy-driven surge in clean energy investment and energy efficiency improvements that would be required to achieve the 2050 goals.

European Commission Executive Vice-President Frans Timmermans said the IEA roadmap shows the world can still change course. “It requires urgent action from all, but it can be done,” he said on Twitter.

But while the Paris Agreement sets a clear global goal, the means to achieve it remain at nation state level. There are examples in every country of inaction or delayed measures due primarily to political squabbles.

A 2019 study of the U.K. parliament published in the interdisciplinary journal Environment and Planning E: Nature and Space found two reasons for the lack of a meaningful response. It stated that politicians felt “little pressure from their electors to act on climate change.”

That may have changed since the study was published, but the study also stated that politicians’ ability to act “is limited by the practicalities and procedures of everyday politics, and by the norms and cultures of their working life.” The study argued that politicians and other stakeholders must have adequate support to articulate the scale and significance of climate change, and to build democratic support for further action.

In times of war, rainbow coalitions and emergency governments often put party lines to one side to get things done. We are now in a time of crisis with a clear goal and timeline.

Since the Stern review in 2006, we have been told numerous times that taking proactive climate measures will result in a better, more resilient world. The IEA report echoes this, forecasting 4% GDP growth compared to a business-as-usual baseline.

So the signs are there that early action is profitable action, but if the carrot doesn’t work, perhaps the stick will.

A Dutch court recently ruled that by 2030, oil giant Shell must reduce its CO2 emissions by 45% compared with 2019 levels. Friends of the Earth said this was the first time a company has been legally obliged to align its policies with the Paris climate accords. NGOs have even found their way to Big Oil boardrooms, unthinkable just a few years ago. Other global companies will surely now be considering the cost of delayed action.

Can we move quickly enough?

With the U.S., EU and China all committing significant funds to the problem, hopefully those funds will soon become available for use. But even with money in place, how quickly can we scale carbon removal technologies quickly enough to make a difference?

While such technologies do not replace the need for drastic primary measures to reduce emissions, they act as a form of climate neutrality insurance. As such, we don’t have until 2050 to implement the technologies. They must be implemented early enough to make a difference to the world’s carbon balance well before 2050.

Such rapid development cycles have been seen with consumer technologies such as smartphones. Steve Jobs unveiled the iPhone in 2007, a product that’s barely recognizable just 14 years later. That’s the kind of rapid development we need, but climate technology and smartphones are not the same thing. Mobile phone technology scaled 40 times during the last 30 years. We need to scale wind and solar energy technologies at a similar rate in the coming 30 years.

Energy infrastructure development requires a long lead-time, but improvements can be made. Solar and wind power are the most cost-effective methods for new power production in much of the world today, but that was not the case just 10 years ago. In Europe we see a surge in carbon prices with the Emission Trading System (ETS) recently peaking at 56€/ton CO2.

That tilts the momentum towards the direction needed whereby clean technologies become the cheapest option. This is where the world’s politicians must once again step up to the plate. This November, the COP26 must focus on how to leverage global efforts to reach an optimum solution for the entire planet.

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