On the Money

EPIC actions needed now to supercharge response to climate crisis

Corinne Sawers 

The case for accelerating decarbonisation has never been stronger. Not only is our long-term security and survival at stake, but it’s also clear that we would be safer in the short run if we were not dependent on imported fossil fuels.

It is accepted on every continent that we must transition the global economy to net zero. Other than widespread target-setting, there is not much coherence in global policy-making. The Nobel-prize winning economist Thomas Schelling argued that the relative success of NATO is a result of its focus on agreed actions. By contrast, the weakness of climate agreements, such as Kyoto, is that they are based on targets.

Whenever I read a book on climate change, I go straight to the section on what to do about it. My typical reaction is disappointment. Recommendations range from banal suggestions that we should “practise mindfulness”, to unrealistic ambitions for a singular global carbon tax.

What actions should we focus on? We don’t need a complete overhaul of every individual’s lifestyle. Decarbonising the economy is not premised on the end of capitalism or loss of incomes. We need to start by making two things happen quickly: make electricity sustainable and run everything off the grid.  This gets us roughly 70 per cent of the way to a decarbonised economy. Saving the planet, harnessing cheaper electricity, and improving our national security are aligned objectives. 

A lack of realism pervades current tactics and policies. Human beings only change behaviour if the alternative is cheaper, better or their friends are choosing it. Businesses only change behaviour if they make more money, or if it’s illegal. Policies should follow the golden rules: effective, simple and non-partisan. Far too much climate mitigation energy goes into efforts that misconstrue these realities.

Currently, we’re not investing fast enough to halve emissions by 2030 and prevent an increase in global temperatures above 1.5°C. If the policies I describe are implemented, this goal is within range, and shorter timelines are realistic. It’s not easy to electrify everything. It requires huge global investment to overhaul the capital base of the global economy. Critically, we have the financial resources and most of the technology we need. It’s entirely doable.  Moreover, an investment boom on this scale is likely to make most of the global population better off, and states that fund it will be wealthier. Given the scale of the threat, and the vast ancillary benefits, we need to move much faster. 

We need to set the incentives right for businesses and consumers, and the magnitude of incentives matters

Charlie Munger says, “Never, ever, think about something else when you should be thinking about the power of incentives.” We need to draw on the evidence of the great successes of the last twenty years, in wind power, solar energy and electric vehicles. If we want to collapse the cost of sustainable technologies and engineer an investment boom, or completely change our spending patterns and behaviour in a way that wins hearts and minds, we need to deploy Extreme Positive Incentives for Change, or EPICs.

The greatest success stories to date in tackling climate change validate this perspective. They play to our palaeolithic emotions, by either making “good actions” very attractive, or bad actions very difficult. We need to set the incentives right for businesses and consumers, and the magnitude of incentives matters. The serendipitous gift of historically low interest rates, even considering market expectations for interest rates, enables governments to do this without compromising the nation’s balance sheet.

Mission-critical is to rapidly accelerate investment in sustainable electricity. We know how to do this. We must de-risk investment by providing price floors for investors and collapse the cost of capital, through the banking sector, through government guarantees, and through targeting monetary stimulus at energy infrastructure. The quid pro quo is that we require the private sector, which financial markets have primed, to respond with much more ambitious investment timelines.

At the national level we need to re-orient fiscal and monetary policy to accelerate creative destruction. Green mortgages and targeted lending schemes are examples of policies that can be supercharged to have a rapid impact. At the international level, we need to repurpose the vast covid recovery financial resources to harness the developed world’s preferential financing rates for investment in lower income economies: a Green Bretton Woods.

So the to-do list depends on who you are. For the policy wonks in finance ministries and governments across the world: harness the state’s balance sheet. This demands a re-focusing of monetary and fiscal policy. We need to deploy extreme incentives across sectors to ensure the low-carbon choice is much cheaper. Electric vehicles need to be priced 20-30% lower than petrol-fuelled alternatives; green steel 20% cheaper than carbon intensive steel. Of course we should aggressively tax the polluting alternative, but only when there is a clear substitute. 

So much for the wonks. Most of us are sheep. Thankfully, a minority are activists and activists have never been more powerful. They won the argument, supercharged by social media. For the non-activist, don’t worry about how much water goes into your dishwasher. The dishwasher manufacturer is on it. If you want to make a difference, become an activist.

Corinne Sawers worked at the UN on climate change before becoming an adviser to global corporations and governments on sustainability and climate issues. She is co-author with Eric Lonergan of “Supercharge Me: Net Zero Faster”