Can We Manage the Turnaround?

Money makes the world go round – also when climate is concerned.

by Polykum Redaktion

von Nikolaus von Moos

What is the current situation?

The cost of climate change is more than 300 billion dollars per year, and it’s growing exponentially. The social cost of carbon, which is an estimate of economic damages created by the emission of one additional tonne of carbon dioxide, lies in the range of 185 dollars, bearing in mind that this is a rather conservative calculation. With this amount of money, I could afford tickets to every game of my football home club for half a year. This makes me wonder – what could we change?

Trajectories for change in investment thinking

In the long run, we have to change our economic system and with it our social and philosophical systems (and probably even other systems). But this takes time. For now, capitalism is here to stay and with it the drive for profit. So how can we get investors with the real substantial amounts of money to fund into changing the world for the better now? As the necessity for a net-zero world is being driven into more and more heads, certain economic considerations are being taken into account prior to investing. First, the venture has to prove that it can still generate an attractive economic excess return on the path to or at net-zero emissions. Second, it has to show that its business model and the way it operates are sustainable. Third, the market conditions should favour companies that are able to work effectively in a low-carbon world, thus making them more competitive, gaining market share, and generating more profit.

Motivations to invest smarter and better

In 2021, out of 16 000 analysed investment funds surveyed, only 0.2% invested in a climate- friendly economy. Clearly, the necessity of a net- zero world hasn ́t been convincing for everyone everywhere. So here are four reasons why we need to change the way we approach investing: First, about two trillion dollars a year will be needed by 2030 to help developing countries cut their greenhouse gas emissions and cope with the effects of climate breakdown. Second, about four trillion dollars a year will need to be invested in renewable energy until 2030 to reach net-zero emissions by 2050. I’m not someone with an economics background, but even I know that these are huge numbers. Third, the climate crisis and the species extinction endanger the price and finance market stability. So from an economic point of view, the opportunity costs rise if we continue to operate the way we currently do. And last but not least, the fact that with our current behaviour, it is estimated that by the end of this century we will achieve a 3.2 degree warming of the earth compared to the pre-industrial times (about 1850).

Rethinking the economy

Greta Thunberg didn ́t participate in this year ́s COP27 in Egypt because she lost faith in capitalism being able to solve the pressing problem of the climate crisis. Other climate activists are also demanding a systemic change. What can such a shift in perspective look like?

For starters, we need to integrate environmental protection into our economic decisions and activities. Second, our historical thinking has to change. Humans are so prone to thinking linearly that there is a tendency to project or extrapolate data from the past in a linear fashion into the future. Instead, we need to start accepting that things in the real world don’t work in quite the linear fashion we have assumed it will. In some cases, developments can happen at a much faster pace than we anticipate. Take, for example, the proliferation of renewable technologies in today’s market . This is a positive sign and can give some hope to act.

Furthermore, the doughnut economy, as can be seen in the Figure, could present itself as a possible future economy system. The basic idea of the model is that our future economy needs to move itself between a minimum wealth standard and the planetary boundaries for vital environmental goods. This questions the understanding of growth by which we function today. We need to redefine it; some areas in economics may not necessarily have to grow any more. To do this, an acceptance that absolute economic growth can ́t be decoupled from energy and resource use is fundamental.

In the pursuit of system change, we can’t ignore the importance of questioning our social and philosophical belief systems. What value do we have in life outside of the overconsumption and materialism that define our economic system today? What do we do with our time when we can ́t always fly anywhere anymore because of a carbon budget per person, as proposed by Renate Schubert, an ETH economics professor? What are our lifegoals when we know that accumulating a lot of money doesn ́t matter while at the same time our very existence is threatened by our extensive lifestyle that goes beyond planetary boundaries? At first glance, such questions may sound threatening. But probably humanity could grow in inner strength and richness if we posed these questions to ourselves.

Interesting approaches for the way forward

Among the various proposed technological innovations and theories of sufficiency (producing and consuming only as much as is really needed), two interesting approaches are mentioned by Anders Sandberg, a researcher and futurist. He opines that the progressing urbanisation may help us by keeping humans closer together and creating larger untouched areas for nature. Moreover, a technique to generate sustainability according to him is to include more reversible processes that are created with lower amounts of energy.

What can we do?

The Science Based Targets initiative (collaboration between the CDP (formerly Carbon Disclosure Project), the United Nations Global Compact, the Worlds Resources Institute (WRI) and the World Wide Fund for Nature (WWF)) stressed that we must reduce emissions by at least 90% by 2050 and remove the remaining 10%. As individuals, we can calculate our footprint, try to reduce the carbon expenses, and maybe pay to compensate those that we produce. For example, permanent removal of 10 kg of CO2 costs 10 Swiss francs at Climeworks, an ETH spinoff that specialises in carbon dioxide air capture technology. Furthermore, research shows that people are willing to do more for the environment when they are motivated by people in their social networks. So we can motivate our near ones and share ideas for transforming the system in our own, maybe small, but significant way.

Nikolaus von Moos, 24,
studies health science and technology with a focus
on neuroscience. Sometimes he ́s overwhelmed by all
the things that need to be tackled, but as he grows
older, he recognizes more and more that a constant
step-by-step approach leads to better results

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