Climate change and geopolitical conflicts are wreaking havoc on economies, livelihoods, and infrastructure around the world. There has never been a greater need for immediate action to achieve deep decarbonization and promote sustainable practices. Our efforts in the green transition, however, are threatened by significant challenges.
The green transition has accelerated in recent years, with global capital spending on wind and solar assets overtaking investment in new and existing oil and gas wells for the first time. This progress is encouraging, with governments around the world investing billions in clean tech subsidies, and even China is jumping in, offering juicy incentives. Even with this momentum, the world will struggle to reach net zero carbon emissions by 2050 without strong incentives to invest.
One of the most significant challenges facing the green transition recently is obtaining permits for new projects. A lack of funding and bureaucratic obstacles has been identified as hindering the development of renewable energy. In America and Europe, endless delays stop firms that want to invest from breaking ground. The worrying thing is that some places are going backwards. Denmark, for example, is a star in offshore wind, but it stopped processing all applications for such projects, after realizing it may be in breach of EU law.
Those red tapes are in fact an issue globally, where the International Energy Agency estimates that renewable generation would rise by an extra 25% by 2027 if bureaucratic and financing barriers were removed. To ensure that the green transition continues an upward trajectory, we must remove barriers and provide sharp incentives.
Another significant challenge is the rising cost of renewable projects. Price caps, taxes, and rising costs are putting renewables providers off, while higher interest rates have made money dearer, making it harder for developers to finance green plants. Some tenders even entice developers to compete over how much they are willing to pay to run projects, which bloats costs and squeezes profits. As a result, profits for renewable energy companies have been squeezed, with many losing money, booking charges, and withdrawing from big tenders. This presents us with a stark challenge, where to avoid a race to the bottom, green power is at the risk of being sold at higher prices than many would like. This is dangerous as it could welcome back our old foe, King Coal.
In addition to COVID-19, the Ukraine-Russia conflict has further highlighted the need for green transitions and net-zero scenarios by the mid-century. As a result of the ongoing crises, economies are at risk of returning to unsustainable practices and non-renewable energy sources, hindering the achievement of some Sustainable Development Goals (SDGs).
Climate change is already causing flooding, heat waves, droughts, and other natural disasters throughout the world. Cyclone Freddy, which thankfully passed 120km from Mauritius, was one of such consequences, and these events are devastating, as they could lead to irreparable damage to economies, infrastructure, livelihoods, and cultural heritage. In Europe alone, climate-related events have resulted in losses of between 450 million and 520 billion Euros between 1980 and 2020. In North America, the impacts of climate change resulted in a $99 billion loss in the USA in 2020, despite reduced economic activities due to COVID-19.
Geopolitical conflicts and climate change pose a severe threat to the global economy, livelihoods, and infrastructure, contributing to long-term losses of approximately 18% of global GDP, or $23 trillion. It is thus imperative that we take immediate action to achieve deep decarbonization and promote sustainable practices. Though challenges persist, promising signs suggest that the green transition can be successful.
First, governments throughout the world have begun to recognize the importance of investing in clean technology and renewable energy. The European Union is investing billions of euros in clean energy projects, setting ambitious goals to become carbon-neutral by 2050. Similarly, China, the world’s largest polluter, has committed to peak carbon emissions by 2030 and carbon neutrality by 2060. US President, Biden, aims to achieve net-zero carbon emissions by 2050 and has proposed a $2 trillion infrastructure plan that includes significant investments in clean energy, electric vehicles, and energy efficiency.
Additionally, private companies are taking climate change seriously by setting their own targets and investing in renewable energy. Apple has committed to becoming carbon-neutral by 2030, while Amazon has pledged to become carbon-neutral by 2040 and launched a $2 billion Climate Pledge Fund to invest in clean technology and renewable energy. Even though companies of this scale contribute significantly to carbon emissions, a move towards greener practices is welcome.
Individuals can also make a significant impact in the fight against climate change by adopting sustainable practices in their daily lives. For instance, if one person switched to using public transportation instead of driving a car, they could reduce their annual carbon emissions by up to 4.6 metric tons. Similarly, if households around the world switched to using energy-efficient appliances and LED lighting, it could reduce global carbon emissions by over 1.5 gigatons per year. Furthermore, purchases made from companies that prioritize sustainability would encourage more businesses to invest in green technologies and practices. These are small individual choices, but when combined, can contribute to achieving deep decarbonization and promoting a green economy.
While the green transition has progressed, challenges remain that threaten to undermine our progress. Obtaining permits for new projects and rising costs are significant obstacles hindering renewable generation. While this suddenly poses a threat to the global north, one may also view it as an emerging opportunity for the global south to step in. Doing so would require mechanisms for knowledge transfer, including purchasing or transferring Intellectual Property, working towards stronger and frictionless regional cooperation, and a strong private sector. To accomplish this, it is essential to identify and remove red tape, while increasing investment incentives. The world must not return to unsustainable practices, as the ongoing crises pose a danger to long-term prosperity.
