The Environment

Global warming is, by a very substantial margin, the biggest challenge the world is facing. The impacts of even two degrees of warming are profound, with, as just one example, several reports suggesting one billion people or more being displaced by 2050. That is worth reading again. Where are these people going to go and what are the consequences going to be when they arrive? Europe struggled to cope with one million refugees that resulted from the ‘Arab Spring’; how on earth will it cope with one billion.   

The good news is that the global political will to tackle climate change is gathering. The EU, under Ursula von der Leyen, has been leading the way but others are entering the fray, including – significantly – China. This drew an almost instant me-too response from both Japan and South Korea and, under a Joe Biden presidency, the US is all set to play catch-up.  

At the same time, the UK announced its plans for a ‘Green Industrial Revolution’ and this choice of words is telling. Governments are doing this not just because they are concerned global citizens, nor simply because they are aware that the cost of inaction is far higher than the cost of action, but also because they recognise that there is huge economic value in leading this next industrial revolution, whether that be in renewables, carbon capture, electric vehicles, new generation shipping & airlines, etc. 

I see a three-pronged approach to tackling climate change:

1. Clearly, where possible, we need to cut emissions but this alone will never be enough, at least not in the timeframe that matters; 

2. We need to sequester more carbon, in large part via ‘natural climate solutions’. This covers a vast array of solutions from protecting and investing in our forests, wetlands, peatlands, mangroves, etc, right through to far more sustainable approaches to agriculture. 

3. Negative emission technologies: often overlapping with one and two above, so-called NETs are a critical part of the solution but cannot be relied upon to provide the whole solution, at least not in the timeframe that matters. 

Central to all these efforts is the need to put a proper price on pollution (a.k.a. carbon dioxide) that forces companies to internalise what has always been, in economic terms, an externality. This is the only way that companies will be properly incentivised to invest in the above.