2016 was an extraordinary year for many of us. In June, the UK’s ‘Brexit’ vote sent shockwaves through the EU and rest of the Western world. In November, the UN climate conference that took place in Marrakech will most likely go down in history as the ‘Trump COP’. The former imperial city in Morocco had a ginger-coloured cloud hanging over it, which had nothing to do with the desert dust.
Despite the bleak picture painted on the future action to address an increasingly hotter planet, climate change still is a top priority for the majority of nations and companies across the globe. Proof of this can be found in a series of encouraging developments that preluded the conference:
- ambitious 2050 strategies were set by several large economies;
- 48 countries committed to 100% Renewable Energy by 2050;
- engagement from non-state actors counted more than 12,000 commitments registered under NAZCA, a global climate action coalition
- 200 companies worth USD 4.8 trillion committed to science-based targets
The COP22 also saw global leaders refute doubtful voices by reaffirming their commitment to defeating climate change, despite the result of the U.S presidential election: the so-called COP22 Declaration celebrates the unstoppable global momentum on climate change and sustainable development action by governments, businesses, investors, sub-regional government, and cities.
One could, of course, challenge the success and ambition of the recent negotiations on the grounds that COP22 was merely a "working COP", where delegations only started to negotiate on the implementation of the Paris Agreement. This opinion hinges on whether one regards the Paris Agreement as a success or not. I would nonetheless like to argue that this is all the beginning and not the end: Paris was a global commitment to take climate change seriously. It sparked a momentum - especially among businesses and investors - that promotes investments in a low-carbon world independent of regulations, and has pushed the business case for climate action to center stage. Ironically, the much-debated ‘weakness’ of the Paris Agreement could even become its guarantor for success: a government has little incentive to quit the Agreement, as it can’t win much - it didn’t "lose" much in the first place. In return, a country 'leaving' the Agreement does not spur a great incentive for others to follow suit.
Although unexpected, the looming shadow of a Trump presidency will not significantly slow down the momentum gained in Paris. Trump’s vehement stance against climate change has led to the nominations of big oil top brass and climate change deniers for key cabinet positions, such as ExxonMobil’s CEO Rex Tillerson for Secretary of State, Ex-Texas Governor Rick Perry for Secretary of Energy, and Oklahoma Attorney General Scott Pruitt to head the EPA. This will certainly impact the US position on climate and potentially undermine other countries’ commitment to the Paris Agreement.
Yet, Trump could well emerge as a secret climate hero! Nobody knows what he stands for, nobody knows what he will tweet about next. After all, in recent weeks, the likes of Al Gore, Leonardo DiCaprio and Elon Musk were seen taking the golden elevator up Trump Tower. The latter has now joined Trump’s economic advisory council despite previously criticizing the president-elect. In any case, even Trump’s voters would hardly appreciate him abandoning a move towards a low-carbon economy: solar jobs in the US have already outnumbered oil and gas as well as coal mining jobs. Trump’s daughter Ivanka, poised to be the ‘first daughter’ in modern history to play a larger public role than the first lady, also seems to have positioned herself as a bridge-builder and champion of causes not-so-dear to her father, climate change being one of them. In retrospect, without Trump, ironically the Paris Agreement would probably never have entered into force so fast: the fear of a Trump presidency ensured that 114 countries covering 79% of global greenhouse gas emissions ratified the agreement within just a few months – world record!
Surprisingly, with the lack of strong leadership from the U.S and the EU, China has come forth as the torchbearer for climate ambition, driven certainly also by the fact that pollution has become a key reason for social unrest . It’s anyway not a bad move to make for China, as jumping the bandwagon to realise the Paris Agreement actually makes financial sense for countries: early analysis by the World Bank Group shows that financial savings by countries working collectively through Article 6 (linking their carbon pricing policies in an international carbon market) can achieve a 30% cost reduction than countries working on their own to meet their respective mitigation targets for 2030, and a 50% saving by 2050. This is consistent with prior economic studies, all of which suggest that international market cooperation can deliver significant savings.
Finally, the push to move forward on climate ambition has been furthered by players in the private sector who have, over the past few years, also realised the widespread implications of climate change for their businesses. This has triggered a plethora of initiatives - all with the objective of building a more sustainable future in which their organisations would not only survive, but thrive. The Guardian, for example, notes that fossil fuel divestment funds have doubled to 5tn$ in just one year. In total 471 companies with over $8 trillion in market capitalization have undertaken well over a thousand ambitious commitments to climate action. These companies represent every sector and geography globally. Far from being activists, these market actors have realised that climate change represents an enormous opportunity for agile and innovative businesses.
So what does 2016 actually tell us about what’s next on the climate change front?
In our “post-truth” world, where the lines between right and wrong have become blurry, where we are continuously bamboozled by radical positions and fake news on social media, it appears that genuine instincts have become essential. My instinct tells me: More and more key decision-makers realise that climate change is a true problem. Solving it is a massive business opportunity, as well as a moral obligation for some, and a fiduciary duty for others. Renewables have reached the tipping point in terms of the cost/efficiency ratio and are now unstoppable. Companies aligning with the Global Goals and reducing their CO2 emissions will be more profitable; countries pursuing ambitious national action will thrive and ensure a sustainable future for their citizens.