Sustainable Land Use
In developing countries where land and water resources are under the most stress, new innovation is constrained by limited public budgets. More private sector investment is therefore needed.
New approaches to land use can address climate change while preserving food security and biodiversity.
About a quarter of all global greenhouse gas emissions result from agricultural activity on cultivated land that is cumulatively the size of Asia. Expanding and increasingly wealthy populations in developing countries will require increasing amounts of agricultural acreage, often obtained through deforestation that adds to greenhouse-gas emissions.
This growing food demand must be met, but as land degradation is curbed and forests are better preserved. A tally published in the journal Nature in 2015 counted 3 trillion trees on Earth, which were being cut down at a rate of about 15 billion per year (researchers have estimated that the global total has dropped by nearly half since the advent of agriculture). There is increasing recognition of the role that natural forest regrowth can play in removing carbon dioxide from the atmosphere.
The WEF’s New Vision for Agriculture, in partnership with the G7, has engaged roughly 600 organizations to work towards the UN 2030 Agenda for Sustainable Development. Effective innovation and collaboration, promoted through the Forum’s Innovation with a Purpose initiative, are essential for more sustainable land use that helps mitigate climate change - all while feeding the world’s growing population.
Tropical Forest Alliance 2020, a global partnership of governments, corporations, and civic organizations, promotes sustainable forestry by subtracting deforestation from the process of cultivating products like palm oil, pulp, and paper. Innovation could further reduce the environmental impact of land use while bolstering carbon storage, water flow regulation, and biodiversity.
The Food and Agriculture Organization of the United Nations has found that investment in land-use R&D can generate rates of return as high as 75%, and innovation aimed at sustainable land use is a key part of the Fourth Industrial Revolution - as satellites, drones, and autonomous vehicles can monitor soil and water conditions and crop health, big data can be tapped to send timely recommendations to a local farmer’s mobile phone, biotechnology can breed more resilient crops, renewable energy generation can be distributed, and fintech can be delivered to communities in need.
The Social Cost of Carbon
In 2018, France suspended a planned tax hike on gasoline and diesel fuel following violent demonstrations. At about the same time, voters in the state of Washington rejected a ballot proposal to tax carbon dioxide emissions (the proposal had been aggressively targeted with an ad campaign funded by the fossil-fuel industry). Clearly, new approaches are needed to gain public support, possibly by refunding proceeds to low-carbon consumers or through simultaneous reductions in non-carbon-related taxes.
Pricing carbon can reduce emissions and enable smarter planningThe High-Level Commission on Carbon Prices, launched in 2016 with support from the World Bank, engages economists and energy experts in designing effective carbon pricing. A private-sector initiative led by CDP (formerly the Carbon Disclosure Project) and the We Mean Business Coalition complements this effort, which in turn goes hand-in-hand with a G20 initiative to reform fossil-fuel subsidies that lead to wasteful energy consumption. Institutional investors are paying more attention to carbon risk management by pushing companies to set an internal price on carbon, assess their exposure to climate-based risks, and allocate capital to a low-carbon economy. BlackRock, the world’s largest asset manager, signaled a significant shift in December 2020 by announcing that climate risk would be incorporated “across our platforms as a critical investment risk.”
According to the World Bank, more than 57 carbon pricing initiatives are in place globally. And, more than 95 countries representing 55% of greenhouse gas emissions are considering carbon pricing to help meet their pledged reductions. Barriers to taxing carbon persist, however.
The cost of carbon-intensive goods like fossil fuels should reflect the damage they cause. Even a small charge on carbon emissions can help insure against climate risk and incentivize the use of (and investment in) green energy. Economists have zeroed in on two forms of carbon pricing: emissions trading schemes (or “carbon markets”), and carbon fees or taxes.
In the past forty years, our understanding of the economic forces underlying climate change has advanced considerably. In recognition of this, the 2018 Nobel Memorial Prize in Economic Sciences was awarded to Yale economist William Nordhaus, for his work on integrating climate change and carbon pricing into macroeconomic analysis.
The results of the COP26 climate summit in late 2021 did not please everyone, but the talks served to focus the world’s attention on the steps now necessary to avert catastrophe. 2020 tied with 2016 as the hottest year on record, and despite the stated aim of the Paris Agreement on climate change to limit warming to well below 2°C above pre-industrial levels – by having countries voluntarily reduce emissions of carbon dioxide and other greenhouse gases – the world is on track to exceed that threshold. Even 1.5°C in warming is likely to lead to punishing environmental impacts, and widespread displacement.
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Investing in Climate Action
According to the New Climate Economy report published in 2018 by the Global Commission on the Economy and Climate, $90 trillion will be spent globally through 2030 on new infrastructure - which exceeds the value of all current infrastructure stock. Developing countries are expected to account for roughly two-thirds of this new infrastructure investment, which can be made sustainable and compatible with climate goals through relatively modest additional upfront costs. Ultimately, these upfront costs can be more than offset by efficiency gains and fuel savings. Strategic investments can stimulate economies and build climate resilience
Investments in green transportation, sustainable agriculture, and climate-resilient infrastructure can have a multiplier effect. According to the Business Commission for Sustainable Development, investing $320 billion annually in sustainable business models in developed economies could unlock $2.3 trillion in additional annual investment by 2030. A report published by the Organization for Economic Co-operation and Development found that better integrating economic and climate action could increase average economic output in G20 countries by almost 3% by 2050. And, the International Finance Corporation has identified nearly $23 trillion in climate-smart investments in emerging markets through 2030.
Governments can catalyze private investment in climate resilience by providing incentives and funding innovation. Businesses can reinforce government action in turn, by making climate-smart investments and by supporting the United Nations 2030 Agenda for Sustainable Development.
Investment in decarbonization surpassed $500 billion for the first time in 2020, despite COVID-19, according to Bloomberg New Energy Finance, and direct investment in electrical power capacity from renewable energy exceeded $300 billion for the second time (following 2017) - including $50 billion in offshore wind. Corporations are signing long-term, large-scale renewable energy contracts, and the Green Climate Fund (an element of the Paris Agreement) is sponsoring nearly 150 projects in developing countries with over $7 billion in committed financing - though still short of the $100 billion targeted to be available annually by 2020.
The potential rewards are enormous; the Global Commission on the Economy and Climate’s report projects an economic gain of $26 trillion through the year 2030 if investments are made in low-carbon technologies and resilient infrastructure, rather than conducting business as usual. Such investments offer an unprecedented opportunity to leapfrog the wasteful, polluting infrastructure of the past, and accelerate the global transition to efficient, climate-resilient, and low-carbon economies.
Transitioning to Clean Energy
Renewable energy accounted for about 14% of all global energy in 2020, a slight increase compared with the prior year thanks to a mix that included solar, wind, geothermal, and modern biomass energy (alongside traditional hydroelectric). Wind and solar are projected to provide abundant electrical power as a way to decarbonize; thanks to economies of scale and technologies like efficient solar cells and larger wind turbines, these energy sources now compete price-wise with fossil fuels. A faster transition is the most effective option for combatting climate change.
The emergence of new renewable energy markets has meanwhile reduced operating costs. In developing countries, renewable energy mini-grids are electrifying communities, while in developed countries solar power is reducing reliance on the grid, bolstered by renewable energy credits and tax incentives.
“Electrification of everything” has become a catchphrase attached to the transition to a net-zero economy - but massive blackouts in Texas, California, and other parts of the world have shown that power infrastructure must become more resilient, smarter, and flexible.
An analysis by the investment bank Lazard showed that during the past decade the “levelized” cost (over a farm’s lifetime) of energy from wind farms has decreased by two-thirds, and from utility-scale solar farms by nearly 90%.
Decarbonizing transportation poses the biggest challenge. Germany and China have announced plans to phase out internal combustion engines entirely, and the number of electric vehicles on the road is projected to increase by more than 7,000% between 2017 and 2030. Still, this will account for less than 15% of the vehicles expected to be in operation by then. GM’s announcement in 2021 that it is going “all electric” by 2035 was the first of its kind for a major manufacturer, and will likely be followed. Aviation and shipping are on track to account for nearly 40% of carbon-dioxide emissions by 2050, though an Energy Transitions Commission report outlined a plan to cut emissions with smarter logistics that improve efficiency and temper demand for carbon-intensive transport.
A cleaning-up of battery supply chains is necessary, from working conditions in mines that supply raw materials to the pollution associated with improper disposal. Still, the high cost of energy storage in batteries has prevented widespread adoption of intermittent renewable energy; massive improvement in energy density is needed for lithium-ion batteries to compete with liquid fuels. The WEF’s Global Battery Alliance was created in 2017 to address these challenges.
The Paris Agreement
The Paris Agreement was negotiated at the annual United Nations climate summit in 2015, and provides a means for participating countries to respond to the environmental, social, and economic effects of climate change. It provides a framework for climate action, though COP26 demonstrated that we’re falling behind on its goals.
181 countries ratified the deal and submitted initial pledges - called Nationally Determined Contributions - to reduce their own emissions and to help regions most vulnerable to climate change adapt.
The agreement was a significant milestone because it achieved consensus on the need to limit the rise in global average temperature to well below 2°C above pre-industrial levels. One of the UN’s Sustainable Development Goals, adopted in 2015 to guide development for the next 15 years, encourages countries to incorporate their climate commitments into national policies, and urges companies to de-carbonize their operations and supply chains. In addition, the Kigali Amendment to the Montreal Protocol (on Substances that Deplete the Ozone Layer) bolsters the Paris Agreement by preventing the equivalent of an estimated one billion tons of carbon dioxide emissions every year (about 40 billion tons of yearly emissions currently result from human activity).
Unified progress on global climate goals was shaken in 2017, when the Trump Administration announced its intention to withdraw the US from the Paris Agreement at the earliest allowed date - which, ironically, was a day after the 2020 US presidential election. The Biden Administration promptly returned the US to the agreement. A new round of revised reduction pledges is expected in 2022, following a bittersweet COP26 climate summit that was held in Glasgow - which will signal how much real progress can be made.
Public commitments targeting greenhouse-gas emissions have been gaining momentum, albeit unevenly.
The COP26 Climate Pact does include provisions aimed at increasing transparency and accountability, and countries are expected to increasingly report on their actions and progress made on climate-change mitigation, on adaptation measures, and on related support that is provided or received. COP27 is expected to take place in November 2022 in Sharm El-Sheikh, Egypt, where activists hope more awareness will be raised about the severe climate impacts being felt in Africa, and more related support will be both promised and delivered.
Understanding Climate Risks
The world experienced a staggering number of climate-related disasters in 2020 - causing damage from hurricanes, wildfires, droughts, and floods that resulted in financial losses totaling more than $200 billion, according to the German reinsurer Munich Re. The US National Climate Assessment issued in late 2018 projected yearly related losses of $300 billion in the US alone by the end of this century.
Extreme weather, rising sea levels, and food and water scarcity are becoming a reality
All ten of the hottest years on record have occurred since 2005. The global average temperature is now about 1°C above the pre-industrial average, and increasing at a rate of about 0.2°C per decade. This warming is largely the result of human activity. Carbon dioxide released by burning fossil fuels, and through agricultural activity like farming, has raised the pre-industrial concentration of carbon dioxide in the atmosphere by about one-third to more than 400 parts per million - which has in turn intensified the trapping of heat.Global warming is causing sea levels to rise and is changing precipitation patterns, with increased rainfall in some regions and more extreme drought in others. A slower temperature rise would also help affected regions better adapt to climate change. In order to meet the 1.5°C target, however, countries must go well beyond their initial Paris Agreement pledges and commit to net-zero emissions by the year 2050.
The Paris Agreement on climate change aims to limit global average temperature rise to well below 2°C above pre-industrial levels. However, a 2018 report published by the Intergovernmental Panel on Climate Change vividly illustrated the need to limit warming to no more than 1.5°C; many ocean ecosystems, including the majority of the world’s warm water coral reefs, are likely to disappear if warming exceeds this level.
The average global rise in sea level - which is projected to be about half a meter by 2100, if warming reaches 2°C - could be reduced by 20% by hitting the 1.5°C target, thereby protecting an estimated 10 million vulnerable people.
Achieving this will require far-reaching changes to many aspects of modern society as we know it, but would also help create a more sustainable, equitable world.
Building Climate Coalitions
Effective action requires engagement with many different stakeholders
Effective climate action will require commitments from a wide variety of players - businesses, national governments, international organizations, cities and regions, just to name a few. The WEF’s Alliance of CEO Climate Leaders has sought to foster public-private collaboration that can support the Paris Agreement and the United Nations’ Sustainable Development Goals.
By joining forces with these coalitions, policy-makers, organizations, and companies can demonstrate a real commitment to climate action, share best practices, and demonstrate leadership.
Businesses, regions and cities in particular took centre stage during the past few years, after the announcement that the Trump Administration planned to withdraw the world’s largest economy from the Paris Agreement on climate change. While that withdrawal effort was later reversed, it provided an opportunity for others to step forward. The We Are Still In coalition, which includes investors, companies, and cities, gathered thousands of signatures in support of a pledge to uphold the Paris Agreement. Meanwhile We Mean Business, a coalition of non-profit organizations dedicated to partnering with the private sector, has engaged more than 1,500 companies (representing nearly $25 trillion in market value) to act on climate change. More than 150 of the companies affiliated with the effort have committed to a goal of 100% renewable power, and many have committed to establishing science-based targets for reducing emissions of greenhouse gases in their operations.