World Economic Forum 2022: Global leaders pledge to green their economies

Decarbonisation is now seen as an urgent necessity

As Davos hosted the World Economic Forum after a two-year hiatus caused by the Covid-19 pandemic, a period that compelled a switch to cost-efficient hybrid work models, it was imperative for world leaders and businesses to ponder the all-important issue of sustainability.

The ongoing war in Ukraine has added to the economic distress already faced by a post-pandemic world that has left people rethinking lifestyle and employment choices. At the end of the five-day WEF, there were many talking points for a more sustainable world.

On Day 1 itself, India’s Minister for Petroleum and Natural Gas Hardeep Singh Puri flagged the global problem caused by the oil price surge and the resulting need to switch to a green path. High crude prices were escalating inflation and causing living standards to decline in a number of countries, he said, adding that several of India’s neighbours were in “dire straits”. Pain is being felt in India itself, where 60 million citizens fill up at the pump every day, he added. The ongoing energy crises show that consumers “need to move on the green path faster” with the transition to renewable energy sources, he said.

In a similar vein, Francois-Philippe Champagne, Canada’s innovation, science and industry minister, told Bloomberg TV that the North American nation can be “part of the solution” as countries and businesses seek more energy security.

Supply chains are becoming more regional and there is “certainly more emphasis on resiliency than pure efficiency”, he said, assuring that Canada can help with critical minerals and also help power the world with “greener solutions”.

According to COP26 President Alok Sharma, oil and gas producers making “extraordinary” profits due to high prices must show how they invest their promised billions of dollars in clean energy in order to avoid windfall tax in the UK.

Sharma, a member of the British governent, said he wants producers to set out quarterly plans showing how they are delivering on a clean-energy transition. And if they fail to do so, “all options are on the table”.

The path to a cleaner climate wouldn’t be easy, it was pointed out. Citing energy shortages and inflationary pressures, Kjerstin Braathen, CEO of Norway’s financial services giant DNB Bank, said that political and business leaders need to be clear with the public that “there will be pain in the process” of getting to net-zero world.

“We need to start talking about that because if we don’t there’s no business, there’s no economy, there’s no welfare,” she said at a session.

In one panel discussion, European Union’s climate chief Frans Timmermans identified companies as the stakeholder who must carry more of the burden from the surging energy costs that have plunged many of the poorest in the world deeper into crisis. He also warned that failure to act could jeopardise support for the green transition.

“Someone who doesn’t know how to make it to the end of the month can’t be bothered with the end of the world,” Timmermans added.

This was reiterated by Spanish Minister for the Environmental Transition Teresa Ribera, who stressed the need for climate transition to address social aspects and inequality to ensure popular support. Ribera warned about a gap of understanding among those calling for climate action and implementing changes, and the workers that will be affected by these changes. “There has been no preparation to create the space for building consensus on how to change.”

Meanwhile, US Climate Envoy Kerry said the world must not retreat from its goal of tackling climate change, even as Russia’s war in Ukraine stokes soaring energy prices. America will help make up Europe’s shortfall of Russian gas and more oil production from West Asia may be required to quell inflationary pressures, but that does not mean there should be a “massive build-out” of fossil-fuel infrastructure, he said.

“If we make the right choices here, we can win all of these battles,” he said. “We can do what we need to do with respect to Ukraine, we can do what we need to do with respect to the climate crisis,” Kerry said. “But we cannot be seduced into believing that this suddenly is an open door to going back and doing what we were doing, which created the crisis in the first place.”

At the WEF, companies also vouched for opportunities and critical measures for a sustainable future.

The head of sustainability at HSBC Holdings said the bank is repositioning itself for the “massive value creation” that’s set to come as the global economy decarbonises.

Achieving net-zero carbon emissions is “the focus of pretty much every single board meeting since I joined a year ago, every single executive meeting. It’s a huge transformation job across the bank,” said Celine Herweijer, chief sustainability officer at HSBC in London, during a panel discussion.

Coca-Cola CEO James Quincey said in another discussion that water needs to be attached to the climate discussion and given value.

One of the big barriers is that around 70 per cent of water is used by small-scale agricultural farmers, and imposing a price on them would be very economically damaging, he said.

“But unless water has a value, it’s going to be difficult,” Quincey said. “If we could value water in the same way we could value carbon, then the market will be the mechanism to drive the results.”

German multinational Siemens has identified opportunities in green investment. Green is the best investment opportunity now, said Siemens AG Chairman Jim Hagemann Snabe in a panel on globalisation’s role in decarbonisation. Following technological advances over the past two decades — such as generating cheaper electricity with solar — a dramatic boost in investments in energy and food systems as well as transportation needs to happen, he said.

“I am optimistic. We have the technologies to shift investments to decarbonisation. It’s a leadership moment.” Putting a price on CO2 is the sharpest way to decarbonise, he said, while high prices for coal and oil are helping, too.

Carbon removal targets also received a big push with software giants Microsoft and Salesforce committing $200 million and $100 million, respectively, toward buying offsets using carbon-removal technologies before 2030. That adds to $2 billion committed to the sector last month, including investments from Stripe and Alphabet.

The US government and WEF also announced the expansion of First Movers Coalition, a buyers’ club that is supporting technologies to cut emissions from industry. It now boasts 50 global firms and eight partner countries, including India, Japan and the UK. The group is setting out advanced market commitments for green technologies in sectors such as aviation, shipping, trucking, aluminium, steel, cement, chemicals and carbon removal.

According to a report from the Polish Economic Institute presented in Davos, the world’s seven-biggest polluters will have to spend $67 trillion by the end of this decade to stay on the path of achieving climate neutrality mid-century.

The economies — China, the US, the EU, Brazil, India, Russia and Japan — are responsible for 70 per cent of global greenhouse gas emissions. Their efforts are key to meeting the goals of the 2015 Paris Agreement to limit warming to “well below” 2 degrees Celsius above pre-industrial levels.

With current investment pledges to green their economies, the EU will reach climate neutrality in 2056, followed by the US four years later and China only in 2071 — 11 years later than its target, according to the report. Russia won’t be able to reach climate neutrality until 2086.

At WEF 2022, nearly one-third of the 270-plus panels were related to climate change, even as young activists at a Fridays for Future climate strike in Davos complained that major issues were ignored. At one of the panels, environmental and human rights activist Helena Gualinga warned that Ecuador is about to experience an expansion in oil production that will further damage the Amazon.