In the midst of lockdowns and economic collapse, 2020 was the year in which some of the world’s largest countries, businesses and investors set their sights on cutting carbon emissions, aiming towards net zero. In a broad group of countries including China, South Korea, Japan, the EU, Canada and South Africa, almost all types of company, tech giants and industrial heavyweights included, are instructed by policy to become greener and less polluting by 2050.
The Year Ahead
In terms of Paris Agreement commitments, 168 states must provide updated and strengthened National Climate Plans (NDCs) ahead of the United Nations’ 26th Climate Summit (COP) in November 2021. There is mounting international pressure for countries to move from the commitment stage to deliverables and practical solutions to reach ambitious, sometimes unrealistic, targets. Whether the focus is on halving emissions with the aim to limit the steady yearly increase in global temperature to below 1.5 degrees or slashing all atmospheric CO2 emissions by 2050, national governments are responsible for doing a lot more than incrementing targets and making public pledges.
Global climate policy and internationally agreed climate commitments will therefore take centre stage in 2021 as the UN convenes the world’s states in three treaty-binding conferences that will seek to legally compel countries to reduce their carbon emissions and promote biodiversity and ocean conservation.
The Gap Between Climate Ambition and Climate Action
While the pursuit of ambitious revised climate targets will occupy the lion’s share of international climate policymaking activity in 2021, expect national governments and policymakers, particularly in advanced economies, to start waking up to the urgent reality that climate ambition will need to be backed up by tangible climate policy action and that ground policy design and committee-based work will need to begin in earnest.
In classic policy design, the circular process from policy analysis to implementation and then feedback is widely known to be slow-moving and subject to many unexpected external influences. Unfortunately, in the emerging context of aggressively revised national carbon plans and the implementation of NDCs, governments and policymakers will not enjoy the luxury of trial and error. Ensuring that climate policies can be developed rapidly without sacrificing democratic oversight or policy vigour will require, at the very least, closer alignment between social partners (government, business and labour), if not specially adapted policy processes.
Governments can also accelerate their national policymaking efforts by activating multi-stakeholder consultations, utilising multilateral organisations of all types and sectors to identify adoptable best practices across a broad range of policy issues such as energy efficiency, procurement models, urban design and public services.
That said, state-centred climate governance in most national jurisdictions will remain weak, with no single country on track to meet 2030 emissions obligations and the necessary policy frameworks to deliver on 2050 net zero targets remaining little, if at all, addressed.
To drive home this overall lack of policy preparedness by governments, consider Sony’s response to Japan’s net zero announcement in September last year, when the company indicated it was considering shifting its manufacturing from Japan to overseas due to the country’s strict new rules on renewable energy and carbon emissions, warning that government policy pronouncements were not aligned with market realities and highlighting the scarcity and premium costs of renewable energy in Japan.
In light of this, expect a greater share of the climate leadership burden to fall to business in general and to tech companies in particular. Governments’ and policymakers’ expectations of large business and big tech to not only reduce their own industry-specific emissions but also to provide leadership and practical technological solutions to decarbonise the entire economy will only continue to grow.
Net Zero Is a Bet on the Tech Sector
In committing to net zero, governments are betting big on the tech sector to deliver rapid and sustained technological innovation capable of driving decarbonisation across the economy. The biggest obstacle to securing stronger business leadership and climate action is, according to our client engagements, the overall lack of policy direction and certainty coming from governments.
For businesses to take action means investing money in changing their entire business models, finding new technology to boost efficiency and adaptability or simply making sure they are informed and compliant – a series of long-term decisions that are entirely dependent on existing and future legislative and regulatory conditions.
If governments are to reap the rewards of their gamble, urgent clarity is required on how governments intend to use the legislative and regulatory instruments available to them to shape the market signals necessary for businesses to take transformative business decisions. Now is the time for enterprising business and tech companies to aid this process by engaging governments with firm proposals on the optimum mix of taxation, subsidies, loans, investments and grants that will support research and development, mobilise investment, support capital allocations, facilitate market access and drive consumer demand for green products and services.
In summary, 2021 will be a “super year” for climate policy, and while international policymakers will remain fixated on ambitious climate target-setting, national policymakers in advanced economies will begin the work of translating ambition into hard policy action. Climate governance will remain weak, and the challenge of acting within the tight deadlines required to stave off climate change will create opportunities for enterprising businesses and tech companies to engage with governments in developing the legislative and regulatory environments that will support the rapid and sustained technological innovation capable of driving decarbonisation and achieving net zero by 2050.
Recommendations
- Both governments and tech companies must keep themselves updated on developments surrounding internationally agreed climate commitments, so they are prepared for the impact this may have on business.
- Governments and tech companies will need to cooperate in order to manage the balancing act of meeting ambitious climate targets while maintaining flexibility and the smooth running of business operations.
- Tech companies should focus on how they can leverage innovation and their resources to support the pursuit of environmental goals, while governments must work to facilitate market access for green products and services.
