Turbo charging the transition towards a sustainable economy
The term turbo charging is fraught with connotations of a combustion engine powered by hydrocarbons, however, the sentiment is well understood. The world’s economies need to urgently move to a sustainable footing and it is dragging its feet.
The Paris accord bound governments to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. Since 2015 the focus shifted to the 1.5°C goal and even that is being seriously tested. What is not well understood by people is the number is an average, and not a benign increase of 1.5°C to make the winters slightly milder and the summers a little warmer, rather we see more extremes of weather thus we see spells of much colder weather in summers and far hotter summers. This matters in an economy as it manifests as increased risks to doing business and increased costs. There is a strong economic case to limit the average temperature increase and even better to decrease towards the pre-industrial weather to mitigate the changes in weather patterns caused by the increase in average temperatures.
How can the adjustments be made in a timely manner to transition from a hydrocarbon based economy to a sustainable one? The simplest would be political will and global agreement, to put a strict cap on emissions, ensure that all countries can make the necessary adjustments and create the frameworks to build the sustainable alternatives to the hydrocarbon economy. We see very slow progress at the COP meetings and backsliding on commitments from national governments, especially in the face of public opposition.
Politicians have learned from the Gillet Jaunes protests that if you do not provide alternatives to everyone (not just an efficient public transport network in the major cities) then you cannot suddenly raise the price of petroleum based fuels without dissent. Had the rural transport network been adequate and the population needed nudging onto busses, trams, trains and bicycles, then people may have been more accepting. This type of protest has also been seen in Netherlands with the farmers who have been told to reduce the nitrate and phosphate pollution and German farmers protesting about the cuts to subsidies of fuel. It is a hard sell for politicians to persuade people of the adaptations that are needed to be made to tackle climate change, the uptake of electric vehicles (EVs) will take a combination of stick and carrot such as setting an end date to combustion engines and ensuring a complete infrastructure is in place for charging. The easy option for politicians is to kick the can down the road for the end date and point to statistics about the uptake of EVs. The discussion is not being had whether we really need to replace every combustion engine with an electric one that is a cheap and convenient to run. Should we not be taking a look at what mobility could look like, and use the transition as an opportunity? What if we developed the cycling networks in all countries modelled on the infrastructure in Netherlands, promoted more walking, park and ride schemes with sustainably powered bus and tram networks? We know there is lower car ownership in countries where there are alternatives. Myths of EVs circulate on social media to the extent that governments need to counteract with facts.
We can make a sensible assumption that politicians are unlikely to step up and make a case for transition from the hydrocarbon economy and explain to the population why it is necessary, what the costs are, how it will be done and importantly set a timetable in place.
If there is not going to be political momentum to make the necessary changes through legislation then there are two other paths; social change, and business led change. Pressure from the population is not likely to succeed as it is a complex topic, despite the simple goal of limiting average temperatures to below 1.5°C. Protests by Extinction Rebellion or Just Stop Oil have brought the topic to the news rooms but nothing happens after that. Say we did just stop oil? Then what? Global trade stops, factories go silent, and there are food shortages? The protests have not triggered a wider movement in the population demanding change, if anything it has succeeded in polarising society.
That leaves business. There needs to be wholescale change, and this is either done by the incumbents or an army of start-ups who see an opportunity. In reality, the incumbent business may make some minor changes, and have the innovation department either explore through R&D and pilots or create an in-house incubator programme. Big businesses are good at incremental changes and making adaptations to stay relevant or to make changes in order to ensure they remain compliant. Less obvious is their innovation track record. The whole corporate environment is a risk adverse setting and not a place for questioning everything which is a key attribute to innovation. Startups are great at ideas and while there is a high failure rate, there are some great companies that emerge. Small companies are not going to bring the products and solutions to market in the timeframe that we need to keep to the Paris accord.
Depressing? Nothing can be done? Not is all doom and gloom. The route to take is for the startups to massively grow. What holds back a startup from becoming a big company? The two big issues are capital and people. Starting with people, the founders of startups are by nature risk takers, there is an informal culture, organised chaos and out of that something great emerges. The startup then runs into issues as an informal culture (read anti-bureaucracy) doesn’t work past a dozen or so people, founders are restless and once the prototypes work their attention often wanders to the next shiny topic. Even if the founders stay focused they don’t necessarily have the expertise or ambition to build a big organisation. Once the startup begins to generate revenue then there is something to sell and founders (perhaps also under pressure from early investors wanting to realise gains) will want out. There is a patchy record of big business buying early stage companies as the innovation and entrepreneurial zeal is often strangled in a corporate environment. Not all startups stutter, and sell out early, there are those who bring in the expertise in early, create processes, procedures and professionalise their operations. The capital needed for growing big can be an issue, especially if the founding team is diluted to the point where they have barely no skin in the game. With a strong revenue stream then debt could be a more attractive option allowing the company to build to generate the revenue to pay the debt back.
The final thought is to consider why business should pick up the baton? As I began, I mentioned the risks to businesses with extreme weather such as disrupting trade flows, damage such as flooding, and higher energy costs to heat and cool. There is a strong case for the transition to bring global temperatures to a more benign climate and thus benefit businesses. There are many benefits in sustainable energy production and storage to businesses, and the materials derived from hydrocarbons can be replaced through biomaterials. The waste the business generates should be seen as a valuable asset and not something that is seen as disposable ending up as cost to society (pollution pumped into the seas and rivers, nitrogen runoff from farms, or airborne pollution). To paraphrase the Yorkshire where there is muck, there is brass where there is waste there is money.
The time is right for the next generation of businesses to embrace the sustainable for economic reasons and not some virtue signaling or green washing.
