Home Op-Ed Beatrice E. Rangel The Climate Paradigm Shift

The Climate Paradigm Shift

The Climate Paradigm Shift
Source: Zignox.

MIAMI — For the last three decades governments have struggled with climate change. While none denies its existence and the threats it poses to our livelihood, actions to reverse it have moved at a very slow pace. The reason resides on the existence of a divided worldwide constituency: half of the world’s population thinks that there are other more pressing challenges while the other half thinks that the whole climate change tale is a retorted concoction brewed by the masters of the technology to take over the world. Climate change aware citizens press for immediate action as they see an imminent climate holocaust. Non-believers resist action.

Under such circumstances public policy triggered action has moved at glacier speed. And in the places where it has moved unfortunately the direction taken has been wrong. In Europe, for instance, promotion of renewable sources of energy such as photovoltaic,  wind and waste to energy has been backed by huge subsidies that are passed to consumers through their electricity bills. A doble negative impact ensues. On the one hand consumers reject renewables on the grounds of their high cost. On the other hand, subsidy recipients enter in a comfort zone that freezes innovation. Without innovation no inroads in efficiency are made and there, of course, is no price competition. Prices of renewables keep high, and subsidies become perpetual.

This explains why after many years of support to photovoltaic in Europe this renewable source of energy only got steam when China, through innovation, halved the solar panels cost.  Other governments have addressed the climate change challenge by equally wrong policies which are those of regulation. Au lieu of taxing the road taken has been to ban the use of coal or fossil fuels in certain geographic areas or economic activities.These policies increase the cost of doing business for small and medium-sized enterprises (SME’s), and in tandem foster market consolidation which also impacts innovation negatively.

This dynamic, however, is about to change drastically. And the change has nothing to do with governments or headways in unifying constituencies in favor of protecting the environment. It has to do with numbers.

The first number that matter is USD173 trillion which according to a report by Bloomberg’s New Energy is the high-end of the investment needed to achieve the net-zero target by 2050. A decade ago, these funds would have had to come from public sources. Today it is highly probable that about 80% will come from private sources. The reason being that environmentally friendly development has ceased to be a loss proposition to become a growth engine.

To be sure, most tech savvy investors know that to reach the net-zero target a lot of innovation must take place. It is estimated by environmental specialists of the International Energy Agency that current technologies can only take care of 65% of worldwide emissions.  The gap must be filled by new technologies. Thus, the development of those technologies is what is behind the current market boom for green-economy-related enterprises. Tesla’s stock, for instance, has surged more than 21,000% since it went public in 2010. These companies are no longer seen by investors as never-ending investment soaking leeches but as winning investment strategies.

Accordingly, the Glasgow Financial Alliance for Net Zero (GFANZ) backed by over 400 funds representing private capital of capital of  USD130 trillion supports the net zero transition by 2050. Launched in April by the former governor of the Bank of England, Mark Carney, GFANZ is backed by 450 fund managers, banks, pensions, and other asset owners. Likewise, The Net Zero Asset Managers Initiative, with USD57 trillion assets under management, has committed to support the goal of net zero greenhouse gas emissions by 2050. NZAMI has 220 members and even BlackRock’s Chairman, Larry Fink, has also announced the commitment of this investment giant to providing funds to attain NetZero 2050.

With these numbers backing climate change related development, the world is about to experience a green economy boom that will make government action, or lack of thereof, irrelevant. Innovation history tells us that whenever a given innovation percolates to touch every economic activity it not only turns the owning companies into unicorns but also changes the course and content of economic development. The creation of the automobile comes to mind. Net zero related technologies are no less revolutionary than the automobile.


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