09 November 2021.
The evidence of human activities breaching planetary boundaries and nature’s very ability to absorb pollution and regenerate resources, is incontrovertible. Intent won’t set us on a climate safe, socially just and economically viable path. Not this time. At the Climate Conference of the Parties in Glasgow (COP26), we need a much higher ambition than demonstrated by Russia, Canada, and climate pariah Australia. It’s no longer time for political games and delaying tactics, the new denialism. At COP26, against all odds, we need world leaders to be sensible and courageous. They need to go beyond and embrace the audacity to reimagine our economic system as if externalities were real. Because they are.
Projections tell us that 63 out of 108 sovereign debt issuers, including Canada, Germany, Sweden, and the U.S., would experience climate-induced downgrades by 2030 under a scenario in which emissions reductions failed to meet global targets. This could cost national treasuries between $137 billion to $205 billion¹. If this sounds far-fetched, let’s simply take stock that 83% of Australia's trading partners have already committed to net-zero plans by 2050. Where would this leave Australia? More to the point, how is Australia planning to create jobs, drive innovation and build thriving and connected communities, the essential ingredients for modern societies?
Whilst the pandemic might have seemed sufficiently challenging, we are living in a time of heightened ‘calamity, conflict and turbulence’². Global debt accumulation, wealth inequality, climate change and biodiversity loss are all failures that both the market, and all voluntary mechanisms have failed to reverse³. Or perhaps have simply failed to recognise or care about. Economics is based on the concept of scarcity and the most optimal path to utility, with the belief that the market will somehow create the most efficient allocation of resources. But when we think of the natural world on which we depend, the impact of market efficiencies come to a head: certain thresholds become existential and irreversible. So we need to stop assuming that the past will continue to work and think again, with humility and ingenuity.
For this to occur some fundamental truths must be accepted:
- The economy is a subsidiary of the environment and a business cannot be sustainable in an unsustainable economy.
- The economy is a social science based on values, culture and the accepted norms therein. What will help us is a shift in what we value and how we value it.
- A long term and sustainable mindset, based on closed loops and regenerative systems, is vital to socio-economic well-being. Good and successful transformations take time to plan and execute.
- The latter point requires a multi-disciplinary and multi-lateral approach, backed by cognitively different teams.
- Capital flows need to urgently move to transitioning entire sectors, create new industrial hubs and ecosystems, re-skill workers and re-envision the future of entire nations.
- We can achieve the above by acknowledging and supporting the introduction of suitable pricing mechanisms, taxes, subsidies, private and public partnerships, blended finance, and multi-development finance initiatives to address where the greatest vulnerabilities, and sources of future migration flows will start. There is no such thing as a free market, markets thrive within defined rules of the game.
As Duncan Austin rightly says “the challenge is not merely to decarbonize but to ecologize. The greatest challenge is to become ‘sustainable enough before it is too late’”⁴. We are most likely to miss the 1.5 degree warming threshold considered by scientists to be the safest one for an ‘orderly transition’. This is because the oceans have been acting as a buffer and warming will continue to latently happen, even if we managed to drastically reduce global emissions today. Urgency is an under-statement.