When Rishi Sunak announced on September 20th that the UK would backpedal on its net-zero goals, the public reaction was predominantly that of incredulous confusion. Many would argue we need stronger government action on climate change – not a step back. And while this was playing out in real time in the UK, the United States was hosting an event which provided a stage for debate. The question they were trying to answer was ironically – how much should governments push private industry to meet climate change goals?
The event – NYC Climate Week – is an annual gathering hosted by Climate Group in New York. The weeklong occasion had more than 585 official events and activities, uniting policymakers, business leaders, investors, and various environmental stakeholders.
A long-suffering debate
During the week there was a clear divide between discussions which were public policy-focused vs. private-industry-focused. This was likely exacerbated as NYC Climate Week took place in tandem with the annual session of the United Nations General Assembly (UNGA). The UNGA brings together world leaders to specifically address the path forward for the Sustainable Development Goals – which include climate change.
One would think with the two events happening in the same week in the same city, there would be a call for collaboration between policymakers attending the UNGA and private industry attending Climate Week. Sadly, the events remained divided despite talks at both gatherings emphasizing the importance of public policy supporting private industry in furthering climate action.
Many of the discussions only served to highlight the ongoing debate over the balance of action between public and private spheres. For example, at an event hosted by the New York Times, leaders argued over the role that fossil fuel companies should play in deciding climate action. Former US Vice President, Al Gore, warned that firms with oil interests are “trying to co-opt climate action” while Michael Bloomberg argued that they needed a seat at the table – “Big oil is part of the problem. They are also part of the solution.” This argument will certainly continue at COP28 as the oil-rich UAE hosts the climate talks.
Why it matters
There has always been a tussle between regulators and private industry. Should we require governments to mandate certain actions to shift to a low-carbon economy? Or should the responsibility be left to corporations, investors, and consumers to change their behavior in the free-market economy? In the context of tackling climate change, there is no doubt it needs to be a bit of both – a policy driven response supported by private-industry.
A bit of history
It used to be (think pre-2010), that the onus for environmental change was on governments. That is how we got the United Nations Framework Convention on Climate Change and thus the annual COP meetings.
But in the mid-2000s, investors and businesses began talking about Environmental, Social, and Governance (ESG) considerations. As a result, we got a bit distracted from demanding policy changes as we focused on the private industry.
Fast-forward to the present day, and most investors and corporations claim to incorporate ESG into their practice. At COP26 in Glasgow, there was a surge of investor and corporate announcements to commit to action. It resulted in the Glasgow Financial Alliance for Net Zero which committed $130 trillion of private capital to transform the economy for net-zero. There is still a long way to go but the approach has been built. So where is the supporting policy?
Governments have a lot of power. And with the power of legislation, they can create incentives and deterrents to address the challenges of climate change more effectively than private industry can on its own.
This power was discussed in numerous forums during NYC Climate Week. Participants highlighted the Inflation Reduction Act (IRA, 2022), the CHIPS and Science Act (2022), and the Infrastructure Bill (2021) as generating tremendous opportunity for sustainable growth – and returns – for companies and investors.
The World Bank estimates that, globally, over $1 trillion USD will need to be invested per year by 2030 to combat the worst impacts from climate change. Legislative ‘carrots’ such as these recent acts can provide much-needed support for the private sector to invest in the low-carbon economy. And there is proof that they work.
In one example, the American Clean Power Association reports that, over the last year, the private sector has announced investments of over $270 billion in domestic utility-scale clean energy alone.
As a second example, companies are excited about the growth opportunities legislative ‘carrots’ can provide. Japanese company Taiheiyo Cement, has reported a strategic expansion of its green-cement program to the United States. This would support the growing construction industry spurred by the Infrastructure Bill and the company could gain tax-related benefits outlined in the Inflation Reduction Act. They are not alone in this action as more companies look to benefit from the legislation.
Regulators need to step up
The importance of policy development from regulators to address climate change is nothing new. And for the past decade there has been a debate between the public vs. private response. The result is that private industry has a roadmap in place and is actively working to address the issue. But it will be especially challenging for investors and companies to meet their net-zero commitments without continued and expanded “carrots” (or “sticks”) being offered by governments.
- Contact your representative! The more they hear that climate change policy matters the more they will fight for it. Remember – you’re the boss!
- Read up on who is contributing the most to GHG emissions! Climate TRACE provides an independent accounting of global GHG emitters on an interactive map!
- Make sure you are registered to vote!
Featured image by Jessica45, via Pixabay.