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Why transition to climate neutrality is more complex than you think
If you jump to 2050 directly from today, economic models indicate that the world will be fine. Technology and economic growth eventually even out the earth’s population, there’s plenty of jobs and we’re not destroying the ecosystem too badly anymore. The problem lies in the 28 years in between. It’s all about the transition to climate neutrality.
The COVID-19 induced economic crisis is like no other. This is the first crisis where the global economy won’t be bouncing back. There is no return to status quo ante, if I may say so. What we need to do is to bounce forward, as far over those 28 years as possible. Think about the heterogeneity of countries, regions within countries and the individuals. Think about the inherent uncertainty.
The EU started the Green Deal process by setting up a Just Transition Fund. “The Just Transition Fund is a new financial instrument within the Cohesion Policy which aims to provide support to territories facing serious socio-economic challenges arising from the transition towards climate neutrality,” according to the European Parliament. May we say that transitional challenges have already been envisaged and budgeted? Not so fast.
We are all bouncing forward to a new status quo outlined in the climate neutrality agenda. For Europe, the target is 2050, for China, it is 2060, and for Turkey, 2053. Note that President Erdoğan has not only announced that Turkey will ratify the Paris Climate Accord, which we have already completed this week, but also set 2053 as the year of climate neutrality for Turkey. That was good news.
Although we are all bouncing forward, there are more adaptive and less adaptive countries, regions and individuals that we need to take into account. Note that climate neutrality requires more cooperation and less competition. Either we will all succeed, or none of us will. No individual salvation here, I’m afraid.
Some individuals will be less adaptive, as their skill sets will not be adequate for the jump at the outset. Reskilling is needed, then educational attainment will be one factor slowing down adaptation. Some regions will be less adaptive for other reasons. Where coal mining or the automotive industry or ship building is concentrated, the transition requires more political effort.
Then there are the countries. The climate neutrality program is all about capital intensive transformation. All countries with higher CDS risk premiums and hence, higher borrowing rates, are going to be less adaptive for sure. Let me show you the graph. No problem on both sides of the Atlantic. Yet for developing members of G20, the difficulty is visible.
Then there are going to be those who lack administrative capacity. The climate neutrality agenda, after all, is both comprehensive and complex. There is no way around it, managing the transitions is going to require immense amounts of regulation. This is hard to measure of course, but if you take development as proxy for organizational capacity, the scale of the problem becomes evident.
What about countries with good and bad governance structures? A just transition requires a transparent dialogue process, so we need more, not less, participatory debate regarding policies, measures and objectives. This is generally not easy in places with bad governance.
Bouncing forward towards climate neutrality requires stronger global coordination and a transparent dialogue process. Yet when I look at the requirements, I get the feeling that we should be talking not about a “Just Transition” but “Just Transitions.” If we are serious about climate neutrality, as we must be, it is time to focus on transition dynamics and think about coordinating these just transitions. We need different policy packages across the globe, joined by a single objective.