Beware the dangers of secular decarbonization

For many, integrating “decarbonization” into public policy, corporate and financial strategies has become a requirement rather than an option—and yet, what happens when the crucial link between climate stability and decarbonization is broken?

a recent report The Intergovernmental Panel on Climate Change (IPCC) explains that the pace of climate action so far is not fast or large enough to achieve the goal of keeping temperatures from rising above 1.5°C. Hence, the original purpose of Paris Agreement will not come true.

The risk of ushering in a secular era of decarbonization—that is, separating decarbonization policies from the belief that they can stop climate change—is growing exponentially. Policymakers, companies, and individuals may reassess their positions on decarbonization. The Russian war in Ukraine is forcing many European policymakers to recognize the need for reliable and renewable energy sources improve national security. geopolitical factors It will likely increase pressure on advanced economies, at least, to pursue low-carbon strategies.

Countries and regions that have invested heavily in renewable infrastructure are likely to continue their decarbonization efforts, no matter what the rest of the world does. Due to economies of scale, these countries have demonstrated that renewable energy, especially solar PV systems, can be cost-competitive with carbon energy production. Existing pathways toward decarbonization will be enhanced by network effects. These occur when benefits accrue to agents who adopt similar rules, such as green ratings. Green indexes like FTSE Russell Green Revenues It has been excel Parental standards over the past five years.

Furthermore, countries highly committed to decarbonization, particularly in Europe, may intensify trade and financial interaction with like-minded nations, and may oppose (perhaps with sanctions) countries that delay or reduce investment in decarbonization. The inflection point may be European Union plan To introduce the Carbon Limits Adjustment Mechanism (CBAM) covering cement, aluminum, fertilizers, electric power production, iron and steel.

In parallel, we can imagine a situation in which countries that have not invested heavily in renewables are finding it increasingly difficult to justify an expensive low-carbon adjustment. Recent data by the Climate Policy Initiative (CPI) showed that Flows of public and private funds for green infrastructure development tend to be heavily biased towards developed countries and Asia. For example, public funds for decarbonization measures mostly flow from European countries to other European countries.

In the absence of significant support from the developed world, elected leaders from developing countries may find it increasingly difficult to fund decarbonization. Because of the different competitive uses of infrastructure financing, the focus can be on climate adaptation rather than on decarbonization.

Without a clear national design for decarbonization—particularly the lack of environmental laws and classifications, along with lagging carbon accounting capacity with regard to standards, estimates and ratings—firms in these countries may find it more rewarding to maintain their comparative advantage in relatively polluting and export industries than in relatively polluting industries. .

Thus, we are likely to see intense economic interaction between countries with weak environmental regulation. We already see that most of the steel from Asia is traded with other Asian countries. China, the world’s largest exporter of steel and iron, exports 70 percent of steel and iron to other Asian economies and less than 10 percent to Europe. The European Union is the world The largest steel market. Germany alone ranks second – behind the United States – in terms of iron and steel imports. more than 90 percent Germany’s imports of iron and steel come from other EU member states.

Secular decarbonization adds a layer of complexity to the geopolitical environment. It could blur the lines between existing geopolitical coalitions. Bifurcation into “green” and “brown” economic activities can lead to green curtains in commerce, energy, finance and industry. This is directly related to discussions about Asymmetric transmission patterns Among the decarbonization leaders, the laggards, etc. Carbon removal division.

These uncertainties point to the urgent need for a “Plan B,” one that will ensure that coordinated global efforts to decarbonize will continue even in the world beyond 1.5°C. Otherwise, secular decarbonization will likely push climate change prevention even further.

Jürgen Bronstein He is a fellow at Harvard Kennedy University’s Belfer Center where he works in Energy Geopolitics Project. Follow him on Twitter Tweet embed.