13 November 2024 – In an opinion piece first published by Reuters, CISL's interim CEO, Lindsay Hooper, explores how we can reach net zero and who can make it happen.
The imperative to achieve net zero isn’t grounded in ideology or political world views, but in the hard and fast laws of nature. Net zero is essential to securing long-term resilience and prosperity. The good news is that the energy transition is unstoppable. The questions are only: how can it be accelerated, and how to achieve a just transition that strengthens global stability?
At present, COPs are the best forum we have to answer these questions. As with all COPs, this year’s climate summit in Baku will see a clamour of civil society demands for breakthrough agreements, alongside pessimism in the face of vested interest lobbying, political posturing and smokescreen initiatives as governments grapple with how to share the costs and responsibilities of climate action.
After the U.S. election, it now takes place in the shadow of imminent US withdrawal from international climate agreements, and plans to expand fossil fuels. There is no way of viewing this seismic shift in U.S. policy as anything other than a major setback at precisely the time that we need our political leaders to roll up their sleeves to work out how we co-exist on a finite planet.
But amid the political upheaval and tough intergovernmental negotiations, the summit’s focus on climate finance places COP29 at another critical crossroads: the future relationship between public and private sectors in the drive to achieve net zero.
The climate crisis, which is inflicting increasingly catastrophic human costs, such as the recent storms and floods in Florida, the Sahel and Valencia, is the direct consequence of today’s economic, energy and business models, which incentivise businesses to operate in ways that can destroy the environmental foundations on which we all depend.
Whatever is negotiated between governments, whether at COP29 or in subsequent international summits on trade and security, it will ultimately be businesses that will mobilise and allocate resources to deliver on clean energy goals and design out greenhouse gas emissions.
The private sector can move quickly when there is a market imperative to do so. The challenge is that for too many sectors and regions, markets still punish rather than reward business action on sustainability.
At this critical inflection point, two stories could play out. In one, governments box themselves in with short-term political and economic vested interests, taking only incremental, crowd-pleasing steps that shunt the hard trade-offs to tomorrow and leave economies and businesses exposed to spiralling costs and risks.
In the other, governments chart a bold path that deals honestly with citizens on the tough choices ahead, addresses the consumption challenge and unleashes the power of markets – spurring a transformation that strengthens economies and provides businesses with the confidence to invest in a sustainable future.
Which story emerges depends on decisions made at COP29 and also in the months ahead, as newly elected leaders, including Donald Trump, show their hands and demonstrate whether and how they will engage with the inevitable energy transition. In the U.S., the Inflation Reduction Act has shown that clean energy creates real jobs and value – and has proactively done so in Republican states. Those gains won’t be easily abandoned.
Many businesses recognise that the lack of forward-looking governance limits their capacity to invest for the future. However, there is distrust of regulation and lack of confidence that more government action will deliver more real-world change. And many of those benefiting from the status quo continue to defend outdated business models, fuelling fears around economic and security risks of rapid transition.
But it is not the role of government to placate business nor to shore up all current business models. True leadership lies in economic, industrial and innovation strategies that are proactive, coordinated, and forward-looking, prioritising long-term resilience and economic competitiveness over short-term expediency. And there is a major and growing international movement of businesses that are leaning in to support governments that are working to bring about effective market reform.
This is led by businesses who have been working, in their own long-term strategic interests, to push the boundaries of what is possible, but are hitting the limits of what today’s markets will bear.
There is growing evidence of what works. For businesses to lead on net zero, governments must provide clear, long-term policy signals to create the conditions that inspire confidence and drive investment. This includes innovation funding and tax breaks to support new tech solutions, as well as public procurement, fiscal incentives, carbon taxes and reorientation of subsidies to drive transition of existing businesses.
Equally crucial is investment in infrastructure, including targeted improvements in energy grids, storage and green transport networks. Support for small- and medium-sized enterprises (SMEs) and workforce development is also essential. SMEs, often at the forefront of green innovation, need access to tools and resources, financial aid and regulatory support to address scaling issues and barriers to market entry. Meanwhile, reskilling programmes are necessary to equip workers for roles in emerging green industries.
A shift toward a circular economy would further bolster resilience and resource efficiency, helping stabilise resource costs and secure supply chains. Finally, effective international collaboration is vital. By harmonising standards and fostering supportive trade agreements, governments can remove barriers, boost global demand for sustainable technologies, and allow businesses to expand sustainably across borders.
The stakes at COP29 strike at the heart of what global business needs from government to drive net zero. As we stand at these crossroads, Baku offers governments a chance to unlock the power of markets and the private sector to lead the transition.