Will COP27 enhance the climate for climate tech firms?
This November, the world’s eyes – and particularly those of the climate tech community – will be on Sharm El Sheikh. This is where COP27 takes place: the most urgent and vital climate conference so far. The February report of the IPCC stated that by 2030, global emission levels should be halved to meet the 1.5 °C temperature increase mark to avoid extreme climate disaster. This means that bold and immediate action is needed now.
Evidently, the world also faces other problems, like inflation and a war-instigated energy crisis. Experts fear that these real-time issues will blind politicians from the greater perils of climate change, resulting in backpaddling their COP26 ambitions rather than doubling down on them. This scenario would be detrimental for the medium- to long term. The agenda for COP27 includes four main topics: mitigation, adaptation, finance and collaboration. This article concentrates on the first, as there is still time – although not much! – to mitigate further climate change.
Thankfully, the majority of necessary climate technologies have already been invented and proven at scale, and they are exponentially becoming cheaper. The next step towards a carbon-free economy will be unlocked by new business models and applications. Not only new physical infrastructure is needed, but particularly digital technologies and the smart use of data will enable a real systemic change. Governments only need to set the financial incentives for market players to deliver the necessary climate action.
Out of the many courses of action that global leaders should be taking at COP27, I’ll highlight just a few measures that would enable the climate tech community to do the heavy lifting:
- Governments should implement market-based financial incentives for low-carbon supply chains and energy balancing mechanisms. This would massively reduce public capex requirements and permit the integration of millions of additional variable clean energy sources into the system.
- Countries should further sharpen energy-efficiency targets in the buildings, industrial and construction sectors. Plug-and-play monitoring, analytics and automation solutions can then unlock the quick climate wins at low costs.
- Through excise duties, leaders should promote the transition from diesel generators and engines towards sustainable energy storage solutions, while carefully regulating the origination of rare materials feeding into batteries. This includes accelerating the transition towards clean transportation through a reduction of existing tax-exemptions for oil and kerosine.
The above are the more obvious courses of action. One of the less eminent but very practical low-hanging fruits is to specify the COP26-announced targets and mechanisms for 24/7 (hourly) carbon markets. Big tech firms Google and Microsoft already lead by example and as next step they have jointly invested in hourly-certification software vendor Flexidao. If governments create the right incentives and regulatory framework, all companies can work towards operating on a 100% carbon-free basis.
In this light, the rest of the world should challenge the EU Parliament on its very recent act to scrap 24/7 PPA rules for “green” hydrogen. This oil & gas-lobbied decision removes the need for additional renewable electricity to be used every hour to produce green hydrogen. Just like biofuels in the past decade, green hydrogen will become a textbook example of greenwashing, as it will immensely add to CO2 emissions rather than remove them. 1,000 TWh/a of electricity is needed to meet Europe’s hydrogen goals of 20 million tons by 2030. If grey electricity is used, tens of millions of tons of CO2 are at stake. The clock is ticking for reverting to the original 24/7 PPA rules proposed by the European Commission, as final negotiations already start in the coming weeks.
It is encouraging that carbon footprint awareness has grown tremendously over the years – especially with younger generations. This is an unstoppable, long-term driver for behaviour change by consumers and companies. All previous COP gatherings succeeded in instigating mass public activation, which was visible in climate marches and subsequently in real public climate action. Because of this growing pressure from a discerning public, corporations have long been at the heart of the transition. But things are not moving fast enough. Now the time has clearly come for politicians to start marching ahead of the band and catalyse change. I am therefore confident that COP27 will not be a conference of short-sightedness and backpedalling, but one of vision and action – enabling markets and technologies to do the rest.
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