As a major global climate summit gets underway in Scotland this week, the U.S. government is still trying to work out what climate policy will be able to get passed in Congress, Europe may have an energy crisis on its hands this winter, and grids and transportation infrastructure around the world are far from ready for the renewable energy revolution.
At the 26th United Nations Climate Change conference, or COP26, global leaders hope to agree on a roadmap to achieve the 2015 Paris Agreement commitment of limiting global temperature rise to 1.5 degrees Celsius. Since we can't just flip a switch and decarbonize the global economic system, businesses need global leaders to provide a transition plan.
According to a survey of 1,232 CEOs across 130 countries done by Accenture with the U.N. Global Compact, 57 percent are prioritizing climate action in their recovery from the Covid-19 pandemic, but only 18 percent of CEOs feel policymakers have provided the clarity needed to recover in line with the pathway to net zero emissions.
Take electric vehicles. Tesla's stock market value has soared to over a trillion dollars, newcomer Rivian is valued at $54 billion ahead of its IPO next week, and every large mainstream car manufacturer is investing heavily in electric vehicle production. But where is the infrastructure needed to charge all these new cars? Where is the grid upgrade, to allow for all the new electricity that will be needed to power these cars without causing blackouts? And where is the renewable energy to feed into the grid, so that the bump in electricity demand doesn't call for increasing the supply of coal, oil, and gas to power the grid? What are governments doing to help secure supply chains for the new materials needed to manufacture all these cars and batteries? Without leadership, the energy transition risks being more chaotic than smooth.
The CEOs interviewed by Accenture had five demands of political leaders:
1. Align Nationally Determined Contributions (NDCs) to a 1.5° C warming trajectory.
NDCs are national climate plans -- including policies, actions and targets -- set up in order for each country to do its part. Once businesses have a clear understanding of the rules and incentives, they can take advantage of the opportunities for innovation and responsible growth.
2. Enhance global cooperation on carbon pricing mechanisms aligned with the Paris Agreement.
Many CEOs, including those of oil and gas companies, are in favor of global alignment on how to financially account for the costs generated by carbon emissions in order to have stronger incentives to curb them. "Without a global price on carbon, it is cost-effective for a business to produce or buy products from countries where there is currently no carbon pricing. This discrepancy favors production relocation and carbon leakage," Claudio Descalzi, CEO of Italian oil company ENI, told Accenture.
3. Meet and exceed the $100-billion commitment in climate financing for the Global South.
CEOs surveyed pointed out that companies in developing countries do not have equitable access to the capital needed for ambitious climate action. They said that reducing the cost of capital and de-risking long-term climate investments can stimulate R&D and innovation. It won't work if only half the planet decarbonizes.
4. Establish common standards for biodiversity protection and pathways for nature-based solutions.
According to the World Economic Forum, more than $44 trillion of economic value, or more than half of global GDP, is moderately or highly dependent on nature. Accenture says this highlights "the gravity of the challenge."
5. Increase business engagement in climate policy formation for collaborative climate action.
"CEOs want to share their expertise, innovation, and climate solutions at scale through policy to halve emissions by 2030 and achieve net-zero by 2050 in line with the Paris Agreement," according to the Accenture survey. Only 30 percent of the CEOs surveyed said they believed governments have a good understanding of business opinion on climate policy.