WEF_The_Net_Zero_Challenge.pdf

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Insight Report
The Net-Zero Challenge:
Fast-Forward to Decisive
Climate Action
In collaboration with Boston Consulting Group
January 2020
World Economic Forum
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Email: contact@weforum.org
www.weforum.org
© 2020 World Economic Forum. All rights
reserved. No part of this publication may be
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by any information storage and retrieval system.
Contents
Foreword
Executive summary
1. The world needs to get to net zero, yet emissions continue to rise
2. Companies and investors should accelerate individual action – in their own interest
3. Ecosystem actions can help overcome barriers to transform
4. A call for unilateral government regulation
5. Individuals need to lead the change as consumers, voters and leaders
6. The way forward: An action plan for all stakeholders
Methodology
Contributors
References
Endnotes
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The Net-Zero Challenge: Fast-Forward to Decisive Climate Action
3
Foreword
Four years after world leaders met in Paris to agree on the historic Paris Climate Agreement, it is time
to take an honest look at the progress on global climate action to date.
This World Economic Forum and Boston Consulting Group report examines what corporations,
governments and civil society have achieved since the accord was drafted in 2015 and assesses
the current state of global climate action. This full report,
The Net-Zero Challenge: Fast-Forward to
Decisive Climate Action,
follows “The Net-Zero Challenge: Global Climate Action at a Crossroads”
Briefing Paper published in December 2019.
Patrick Herhold
Managing Director
and Partner,
Centre for Climate
Action, Boston
Consulting Group
The findings for this report are based on quantitative and qualitative assessments of governments,
corporations, investors and societies. We conducted interviews with 13 climate experts and 24
CEOs and executives of leading companies across all sectors – from energy and industrial firms with
high direct emissions, to technology, service and consumer businesses with significant influence
over the emissions of their supply chains and products. We analysed corporate data from CDP, a
non-governmental organization that collates voluntary emissions disclosures from nearly 7,000 large
companies, monitors global emissions and assesses policy frameworks from governments. Our
analysis was supplemented with additional research from the Energy Transitions Commission (Mission
Possible),
International Energy Agency, Intergovernmental Panel on Climate Change, United Nations
Environment Programme, Climate Action Tracker and World Resources Institute, as well as previous
work by Boston Consulting Group.
At this year’s World Economic Forum Annual Meeting in Davos-Klosters, climate change is high on
the agenda. The year 2020 marks the fifth anniversary of the Paris Agreement, and there are high
expectations that the 26th UN Conference of the Parties (COP26) in 2020 will deliver a meaningful
international response to the climate crisis. With this crucial milestone ahead, we have an opportunity
to build a strong, unified call for accelerated action among business and government leaders.
Emily Farnworth
Head of Climate
Change Initiatives,
World Economic
Forum
We must turn the trajectory of greenhouse gas emissions around to ensure that global warming stays
within safe limits. While the risks of inaction are mounting, it is still possible to prevent the worst effects
of global warming. The costs of abatement are falling and the technological solutions needed to
decarbonize our economies are available.
It is within everyone’s power and responsibility to act. This report aims to help clarify the path ahead
and encourage the decisive acceleration of climate action.
4
The Net-Zero Challenge: Fast-Forward to Decisive Climate Action
Executive summary
In 2015, world leaders met in Paris and agreed to limit a global
temperature rise by the end of the century to well below 2°C
and to pursue efforts to limit the temperature increase even
further to 1.5°C. In the past decade, however, emissions have
continued to increase at a rate of 1.5% per annum. A reduction
of approximately 3-6% per annum between now and 2030 is
needed to limit global warming to 1.5-2°C.
1
Progress on climate action to date has been limited.
On
the government side, while 121 countries have now committed
to be carbon neutral by 2050,
2
they account for less than 25%
of emissions. None of these countries are among the top five
emitters, and few, in spite of the commitment, have enacted
policies that are robust enough to produce the desired effects.
On the corporate side, only a minority of companies fully
disclose their emissions. Even fewer have emissions targets or
are in the process of making reductions in line with the Paris
Agreement trajectory.
3
And while investors have begun to
recognize the importance of assessing climate-related risks,
liabilities and opportunities, much of their day-to-day decision-
making continues to be dominated by an emphasis on short-
term performance. In light of this global inertia, public pressure
and global activism have surged in recent years, especially
among the youth and in Western countries. However, public
education on the threat of climate change and related climate
action is still insufficient to make this a global phenomenon.
Since progress in international negotiations is
disappointing, corporations and governments need to
move unilaterally.
The world needs cohesive and swift global
policy action – and progress is urgently needed at the Annual
Meeting in Davos-Klosters and the COP26 this year. But with
the slow pace of international climate negotiations to date
and the complex political context, the reality is that a global
consensus will very likely not be established soon enough to
counter the crisis. Individual governments and corporations
can and should move ahead with unilateral initiatives; it is about
realizing savings from efficiency improvements, managing
risks, pursuing new opportunities and maintaining the long-
term licence to operate. While no single actor can halt global
warming alone, efforts by leading industrial nations or large
corporations can have a multiplier effect.
Corporations can accelerate individual action and
commit to meaningful short- and long-term reductions.
Companies in all sectors can do much more to reduce
the emission intensity of their business and supply chains
through measures that cost them little or nothing, and can
offset residual emissions. All should actively monitor and
manage their climate-related risks and increase their efforts
to achieve a 1.5-2°C world (for example, with internal
carbon pricing), anticipating a future with more stringent
policies and greater societal mobilization. Most can develop
new business models that contribute to achieving a low-
carbon economy and capitalize on the new value pools for
“green” products and services.
Ecosystem actions can overcome barriers, through
collaborations along value chains or with industry peers.
It
will take a joint effort to overcome existing transformation barriers
in sectors where decarbonization costs are too high for individual
companies to bear alone. Through cooperation in coalitions,
companies can share the risks of technology development and
coordinate related investments in the development of low-
carbon solutions. They can generate a demand signal through
joint commitments or standards, and set up self-regulating
bodies in areas where government policies fall short.
Investor action can enable transparency and support long-
term decarbonization plans.
Investors can coordinate to define
and apply standards for disclosure and reporting. Such efforts
can encourage companies to address their climate-related
risks. Even more importantly, investors can increase scrutiny on
long-term climate risks and opportunities, and encourage asset
managers to set long-term targets and strategies towards net-
zero emissions.
Governments can unilaterally enact national regulation to
reduce emissions immediately.
Many countries can benefit
economically from carbon abatement investments. To deliver on
the net-zero ambition, they would need to enact ambitious policy
frameworks that include a meaningful price on greenhouse gas
emissions. However, while carbon pricing is regarded as an
effective and necessary lever, it is unlikely to be sufficient. For
one thing, abatement costs differ widely across sectors, which
implies that carbon prices incentivize some sectors to move
earlier than others – while practically all sectors would need to
start abating today. Alongside carbon pricing, sector-specific
regulations and incentives would promote remedies such as a
switch from fossil fuels to renewable energies, electric mobility,
efficiency, green building standards – supported by accelerated
innovation. As long as the world as a whole is moving slowly,
national efforts will also require measures to protect emission-
intensive industries from high-carbon, low-cost competition,
through mechanisms like cross-border carbon taxes and low-
carbon product standards.
Individuals need to drive climate action in their roles as
consumers, voters, leaders and activists.
The transition to
a net-zero economy will be a transformational shift for all of
society. Individuals have to take the lead in inciting governments,
businesses and every part of society to move.
The world is at a crossroads: We must fast-forward to
decisive and cohesive action.
The coming decade will
determine whether humanity retains a fighting chance to limit
warming to 1.5°C or even 2°C. The later action is taken, the
more dire our position will become. The technologies for a
low-carbon transformation are largely available, the barriers to
action are vastly overstated and the consequences of inaction
are well known. Climate action is still too often perceived as a
cost or a trade-off with other priorities. In light of the facts, it
should be viewed as an opportunity for businesses, countries
and individuals to create an advantage in building a better, more
sustainable world.
The Net-Zero Challenge: Fast-Forward to Decisive Climate Action
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