“Pour ce qui est de l’avenir, il ne s’agit pas de le prevoir, mais de le render possible”
— Citadelle (1948)
Antoine de Saint Exupéry,
With the IPCC’s latest findings, the path of our travel is clear. Yet, our destination is not. Staying below the 1.5-degree guardrail will require colossal, coordinated government and private sector-led changes. However, drastically plunging costs—specifically for solar PV, lithium-ion batteries, and wind power (which have declined by 85%, 85%, and 55%, respectively, over the last decade)—may make emissions-intensive sources “more expensive”. While carbon dioxide removals (“CDRs”)—either through natural or technological means—to reverse warming are now unavoidable, predicts the IPCC, swift supply and demand-side actions could minimise the need for CDR.
Indeed, the IPCC devotes an entire chapter to how demand-side measures—including on energy efficiency—can cost-effectively and rapidly address both energy shortages and emissions reductions. Nonetheless, post-Covid fiscal pressures still deter governments from additional energy efficiency commitments. Notwithstanding this, the WGIII describes how cultivating “circular economies” could also significantly help reduce energy use and emissions. For example, switching to recycled aluminium could reduce energy usage by 95%, compared with primary production methods. When coordinated with other demand-side policies in the transport, industry, buildings, and food sectors, these transition strategies have potential to reduce global emissions by 40-70% before 2050.
The economic benefits of limiting warming to under 2 degrees, the WGIII authors say, will likely far exceed the costs of mitigation. These climate actions would lower global GDP by only several percentage points by 2050. Yet, importantly, most assessed literature predicts that the necessary mitigation costs would be far lower than the costs of adaption, incurring losses for stranded assets, or paying for any ensuing climate-related damages.
Vast new markets and economic opportunities for low-emissions technology will open as the net-zero transition ensues. The IPCC forecasts the need for a three to six-fold increase on current annual climate investment levels. McKinsey notes that the shift toward low-carbon institutions and projects may indeed amount to the “largest reallocation of capital in history”. It predicts that the transition could generate more than US$12 trillion of annual sales by 2030. Total spending on low-emissions assets could eventually amount to 70% of global capital outlays through to 2050.
Rather than approaching the climate as merely a source of potential risk, companies able to foresee and leverage new possibilities for value creation will lead the net zero transition. The Ellen MacArthur Foundation, for example, indicates that six of the world’s ten-largest consumer packaged goods companies have committed to using more recycled packaging by 2025. Some recycled plastics now command almost £340 per tonne in price over virgin plastics, at the same time as demand for recycled plastics is increasing.
There is certainly evidence that first-mover opportunities remain. Nonetheless, some companies are already adjusting their business portfolios to penetrate new climate-friendly goods, services, energy, and infrastructure markets. They are already attracting value and price premiums (in some cases, by 50% or more) through green differentiation. These green premiums continue to expand, particularly in sectors with large supply-demand imbalances (such as plastics manufacturing and green hydrogen production).
Suppliers seeking to dominate new markets are also locking in long-term contracts with their customers: particularly those committed to lowering Scope 3 (supply chain) emissions and carbon price liabilities. On the other hand, manufacturers—who consume raw materials—could distinguish themselves from their competitors by negotiating contracts to secure supplies of green materials and inputs, the future availability of which may be impacted by shortages and price rises. Leading companies could also furnish their stakeholders with third-party verified information about supply chain and lifecycle emissions, along with transparency about their sustainable credentials.
Ultimately, climate change will reshape all lives on this planet. It compels us all to engage in the duty to fix it. Companies pursuing new climate opportunities will help make the net zero transition possible. Any chance we have left to sustain a liveable planet may depend on it.