Climate change is affecting millions of lives around the world, whether through rising sea levels, vanishing ice sheets or record-breaking heatwaves. Fuelled by extreme temperatures and extensive drought, the Australian bushfires of 2019–2020 killed more than 30 and destroyed over 11 million hectares of parks, forests and natural ecosystems. Indonesia’s climate-induced flood in early 2020, meanwhile, claimed more than 60 lives. In the same year, a super-cyclone broke out over the coasts of India and Bangladesh, causing severe destruction, while flooding damaged hectares of land from which people in Kenya, Central and West Africa make their living. Over in Europe, record heatwaves killed more than 1,400 people in France during the summer of 2019. A few months later, on 28 November of the same year, the European Parliament declared a global climate and environmental emergency.
Not only has climate change manifested itself more visibly in recent years, but its impact on socioeconomic development has been significant too. In 2019, an estimated $100 billion of economic losses were attributed to extreme climate events. Since then, severe winter storms sweeping across the US have undermined energy security in Texas, cutting power supply to four million customers. In Africa, where an estimated $35 billion is spent on annual food imports, the burden of feeding the continent’s teeming young population will be multiplied dramatically. Food insecurity, infrastructure vulnerability, mass migration and civil unrest are some of the existing and anticipated knock-on effects of the emergency.
Extreme weather events and natural disasters (Figure 1) are set to occur with greater intensity and frequency. While it has been observed that natural disasters happen three times more frequently today than they did in the 1970s, economists have predicted annual GDP loss related to climate of between 2 and 10 per cent in the coming years. By 2050, the potential value of climate risks will multiply between two and 20 times while undermining living and working conditions around the world. Analysis indicates, for instance, that the risk of extreme precipitation will increase fourfold in Central Africa, China and the east coast of North America. Without strong mitigating measures in place, food supply will be disrupted, and prices will increase; physical assets and infrastructure services will be destroyed while natural capital will be lost.
The scale of the challenge is formidable. Greenhouse gas emissions have continued to rise (Figure 2) and even if all current targets are met, the world will not meet the goal of the Paris Agreement to limit global warming to 2°C. Rapid decarbonisation is the only realistic route to bending the emissions trajectory sufficiently downwards. At present, it remains uncertain if or when global emissions will peak – or indeed begin to decline.
Figure 2 – Trajectory of greenhouse gas emissions in multiple scenarios
Source: Our World in Data
The question is, can we be optimistic about tackling the climate emergency? Political debate persists, riddled with disagreement and rancour. Some argue for a ‘degrowth’ economy as a way to upend emissions. Others argue for incremental changes to business-as-usual approaches. While countries are committing to net zero targets, views on them are highly divergent with fairness and adequacy as widely debated as the scope and roadmap for how to achieve them. Market-based approaches, including the cap-and-trade or carbon tax systems that some governments have relied on, have been challenging to scale. At a time when the world is recovering from another emergency – the Covid-19 pandemic – governments are preoccupied with short-term goals that quite frequently do not align with climate objectives. So, can the world address the climate emergency before it is too late?
The Promise of Technology
Technology and innovation provide a critical opportunity to address the climate emergency. Across all key economic sectors, technology has the potential to unlock emission reduction and move the world towards net zero using levers such as demand optimisation, fuel substitution, efficiency improvements and carbon capture.
Figure 3 – Innovation levers for bringing about emission reduction per sector by 2030
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PowerIndustryForestryTransportAgricultureBuildingsOther0123456789101112
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Source: Author, UNEP Emission Gap Report
As seen in Figure 3, the power sector presents a significant opportunity for emission reduction through technology. Countries around the world have used fossil fuels to drive industrial development, contributing significantly to greenhouse gas emissions. In the era of climate innovation, however, new technologies are taking centre stage, including renewables, energy storage, hydrogen, grid optimisation systems and more. The cost of solar energy has been slashed by 99 per cent over the past four decades. In the US, where coal provided 46 per cent of power generation in 2010, fossil fuels today account for approximately 20 per cent. Investment in renewables has continued to grow significantly, reaching a record of more than $500 billion globally in 2020.
Agriculture and farming produce more than a quarter of the world’s greenhouse gas emissions, with the sector accounting for 45 per cent of methane and 80 per cent of nitrous oxide globally. With a global population projected to hit 9 billion by the middle of this century, food production must increase by 60 per cent. The challenge is enormous. The world needs to produce more food more efficiently, under volatile environmental conditions, with a net reduction in emissions. Promising technologies that are being embraced in the 21st century – from gene editing to protein substitutes – are supporting this ambition, helping to improve agricultural productivity while limiting emissions.
Transport, through fuel combustion, generates more than 24 per cent of global emissions. While road vehicles constitute nearly three-quarters of the sector’s emissions, aviation and shipping are also becoming significant contributors. The recent Suez Canal gridlock caused by the accident of the Ever Given container ship shone the spotlight on the shipping industry and its impact on climate. Despite such high emission levels, however, the transport sector is witnessing a growing range of new technologies that are reversing the trend. Climate technology start-ups in the mobility and transport sectors have received sizeable portions of climate-related investment from venture capitalists over the past decade.
Industry operates at the heart of economic development, as an engine of growth and key source of job creation. Responsible for a third of global energy consumption and a quarter of greenhouse gas emissions, there is no slowdown in its contribution to the problem with iron, steel, cement and chemicals leading the pack. New technological responses are making an impact, though, turning this sector into a platform for large-scale greenhouse gas reduction. Industries can leverage advances in combustion efficiency, circular economy, waste-heat recovery, hydrogen and other opportunities to mitigate emissions.
Buildings are significant energy users, consuming half of the world’s electricity. When indirect emissions from upstream power generation are considered, buildings accounted for 28 per cent of energy-related CO2 emissions in 2019. Having grown consistently since 2013 after a temporary plateauing, these emissions are unlikely to decrease as the current 230 billion square meters of building space around the world grows by an estimated 30 per cent by end of this decade. While the impact is significant, major advances in climate-friendly technology range from optimal design of building envelopes to efficient lighting, heating and cooling systems and more energy-efficient appliances.
Forestry, which acts as a natural carbon sink, offers a low-cost opportunity for making significant emission savings. Deforestation today causes almost as many emissions as road travel but by leveraging the nature-based solutions of forestry conservation, land management and restoration, and by using technology optimally, the world could achieve 7Gt of CO2-equivalent emission reduction per year. Nature-based solutions are typically low-cost, at a value of between $10 and $40 per ton of CO2 depending on the project location.
Closing the Innovation Gap
Navigating climate innovation can be complex given the wide range of technology options and the unique cost, risk and benefit profile of each one. Cost curves related to carbon abatement (Figure 4) – a tool that has been applied in a broad range of markets – offer a starting point for policy leadership on climate innovation. In this figure, capital intensity represents how much needs to be invested in a technology product above the business-as-usual alternative in order to reduce emission levels by a unit, while abatement potential represents the emission reductions obtainable when specific climate technology options are deployed to their maximum potential. By developing strategies along the abatement curve, policy leaders can address gaps using the full spectrum of climate technologies. Three broad policy approaches are critical to the success of climate innovation, as follows:
Standardise
For climate technologies – which have already achieved significant market momentum including LED lighting, and building efficiency retrofits – the strategy is to standardise performance and regulate the market to ensure maximum emission abatement.
Smart technologies including smart home and office equipment will play an increasingly significant role in the future of efficiency. Product tools such as the energy-star symbol may have provided a solid start in terms of consumer and business awareness but there are further opportunities to unlock system-level efficiency through these technologies. Governments need to adopt improved performance standards to ensure they deliver maximum abatement potential.
For climate technologies – such as utility-scale energy storage, hydrogen and large-scale nature-based conservation – whose suitability for the medium to long term has been proven albeit with a high-cost-barrier, they should be scaled up by governments using targeted incentives. For example, manufacturing companies operating in an industrial cluster may be incentivised to invest in certain carbon-capture technologies through trade-zone agreements, carbon prices and tax credits.
Nature-based conservation projects may be implemented in developing countries where cost advantages are achievable.
A particular focus may be given to enabling technologies like the charging infrastructure for electric vehicles, hydrogen refuelling stations and other low-emissions enablers including virtual power plants. Supporting direct investments will significantly propel climate innovation in the medium to long term.
The third group is a suite of emerging technologies, some of which may be considered moonshot concepts from direct air capture to nuclear fusion.
The strategy for this category should be to support investment based on the potential of emission reduction, feasibility and the potential to catalyse further innovation and create positive spillovers.
Policy attention must be paid to lowering the learning curve for these technologies in order to attract growing commercial interest from potential markets.
Specific sectors including shipping and aviation have proven to be tough to decarbonise. Incentivising innovation of second-generation fuels and mobile carbon capture would help drive down steep costs.
Carbon pricing alone is likely to be insufficient as a policy instrument. Therefore, more of a complementary and targeted approach sustained over the long term will be essential to closing innovation gaps in carbon capture.
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