Will 2021 be the year of living dangerously?

As the third decade of the 21st century gets under way, we will look back on 2021 as a year when the future of our life on earth balanced on a fulcrum. But which way will we lean? Will we grind out a post-COVID-19 recovery along the lines of the recovery from the last great global financial crisis in 2009 towards a more dangerous future of higher consumption and emissions? Or will policy-makers, politicians, business leaders and civil society summon their collective imaginations, cooperative spirit and willpower to craft stimulus packages and investments that lead to a more sustainable, nature-friendly future?

Last year broke yet more of the wrong kinds of environmental records. A peak temperature of 38°C inside the Arctic Circle. Wildfires in the Amazon that spread to the Pantanal, the world’s largest tropical wetland, driving a drought that cost Brazil’s agriculture sector $3 billion. Historic levels of flooding along the Yangtze, affecting 63 million people. More Californian fires to add to the $148 billion of losses from 2018’s fires. A record number of Atlantic hurricanes making landfall.

Yet amid the storm clouds of grim statistics are some sunbeams of hope. Last year saw a doubling in the number of companies committing to net-zero targets. The election of Joe Biden means the three largest carbon emitters in the world – China, the EU and the US – have all committed to emissions reduction targets that will start to bend the warming curve. But the actions we take this year and this decade are critical, as their impacts will resonate for generations to come.

The landmark Paris Agreement is clearly driving climate action. Estimates of end-of-century warming, based on real-world climate policies, have fallen from 3.6°C in 2015 to 2.9°C in December 2020, according to The Climate Action Tracker, a consortium of non-profits that includes the highly-regarded Potsdam Institute for Climate Impact Research.

To stand a good chance of hitting Paris’s 1.5°C target, global CO2 emissions must reach net zero by 2050, with other greenhouse gases following soon after. Some European countries, the UK and small island states were among the first to commit to net-zero emissions by 2050, followed by the European Union in March 2020.

Then, at the UN’s General Assembly in September, President Xi Jinping surprised everyone by pledging to take China – responsible for one-quarter of global emissions – carbon-neutral before 2060. Japan, South Korea, Canada and South Africa followed with their own net-zero announcements. Meanwhile, President Joe Biden has promised a carbon-neutral United States by 2050.

This takes the number of countries with such commitments to 127 – responsible for around 63% of global emissions. According to The Climate Action Tracker, if all these targets are achieved, “our temperature estimate for 2100 would be as low as 2.1°C, bringing the 1.5°C temperature limit of the Paris Agreement within reach”.

Pledges are the easy bit; it’s tougher to figure out how to get there. Ahead of the COP26 climate conference in November, the UK, the host country, is leading the way by committing to cut emissions by 68% by 2030. Other governments need to adopt stronger targets for this decade, at least halving greenhouse gas emissions by 2030, to ensure they can deliver on their 2050 net-zero goals and close the gap to 1.5°C.

Clean energy is the biggest challenge. Energy for transport, electricity and heat, buildings, manufacturing and construction – plus fugitive emissions and other fuel combustion – accounted for a colossal 73% of world greenhouse gas emissions in 2016, according to the World Resources Institute. Despite impressive growth in solar and wind power, fossil fuels still supply 84% of the world’s energy consumption, according to oil giant BP. Renewables and hydro supply 11%, while nuclear’s contribution is 4%.

The key to hitting our emissions reduction targets is to kick our addiction to oil, gas and coal. The question is how? In a recent interview with The Economist newspaper, Bill Gates was asked whether the climate challenge was one of behavioural change or innovation. Gates emphasized innovation unequivocally. It is important to change our habits, but that will deliver at best a 15% cut in emissions, according to the International Energy Agency. “We’re not just trying to reduce emissions by 15% or 20%; we need to get to zero,” said Gates, adding: “The kind of activities that produce emissions are so pervasive you can’t drive down demand for those services that dramatically. In fact, in developing countries, you should allow demand for those services to go up.”

Innovation has led to spectacular advances in the efficiency of solar cells, lithium batteries and both onshore and offshore wind power. We now need to find new, low-carbon ways of making steel and concrete, of propelling cars and planes. To unlock the innovative power of the private sector will take leadership and capital. Yet, the combined annual investment in climate-friendly technology, from venture capital, governments and energy companies, currently totals just $80 billion – around 4% of the global total spend on R&D.

Governments need to step in and fund R&D into the technologies that are too risky or large for private investors to take on alone, such as green steel and cement.

Even with innovative solutions, new technologies will cost more initially – what Gates calls the “green premium”. Getting this premium down near to zero is vital if these green technologies are to be adopted at scale, especially in emerging markets such as India. Governments can play a key role in creating the demand needed to build volume and reduce prices, by, for example, greening their own procurement processes.

More importantly, governments need to set a price on carbon. Gates reckons somewhere between $100 and $200 per tonne would send out a clear market signal. BP has calculated that a net-zero scenario requires carbon prices to reach $250 per tonne in the developed world by 2050, according to its Energy Outlook 2020. Carbon pricing is needed to “incentivize significant gains in both energy efficiency and the use of lower carbon energy sources,” says the oil major.

If there is a silver lining to the pandemic, it is that it gave the atmosphere a brief breathing space in the relentless upward surge in CO2 emissions. It wasn’t enough to halt the heating of our planet’s surface; when the data is in, scientists expect 2020 to be on a par with 2016 as the hottest year on record. But COVID-19 might offer a more long-lasting contribution to the battle against climate change – the chance to chart a more sustainable economic course out of the pandemic. With governments spending trillions on stimulus packages, the opportunity for a green recovery is too good to miss.

Government investment in the circular economy and climate-friendly infrastructure would not only slash emissions, but stimulate growth and create new jobs. Of the 84 billion tonnes of materials consumed globally each year, just 9% are reused. For Europe, a circular economy development path could halve CO2 emissions by 2030, while increasing each household’s disposable income by €3,000, according to the Ellen MacArthur Foundation.

The EU is planning a transition to a circular economy as part of its Green Deal and anticipates this will save businesses €600 billion a year, while creating 580,000 new jobs by 2035. Answering this push, on 21 January, the World Economic Forum launched the global Circular Electronics Partnership with 30 top electronics brands to create a circular economy for e-waste, which is worth at least $62 billion annually. Meanwhile, the combination of cutting subsidies to fossil fuels – easier with oil prices so low – and boosting revenues from a carbon tax could help governments plug the huge deficits they are running up in the recovery from COVID-19.

The private sector needs to step up, according to Gates. “We expect leadership from companies that are big and doing well and have the IQ to have a department that’s really thinking these things through,” he said. He warned against bosses just going through the motions on metrics: “Companies are going to have to make the distinction between trying to look good and actually having impact.”

On 21 January, the Forum published a report, Net-Zero Challenge: A Supply Chain Opportunity, which details how decarbonizing eight supply chains – including food, construction, electronics and automotive sectors – could halve global emissions, while only pushing up end-consumer costs by a few percent. “Supply-chain decarbonization will be a ‘game changer’ for the impact of corporate climate action. Addressing Scope 3 emissions is fundamental for companies to realize credible climate change commitments,” said Nigel Topping and Gonzalo Muñoz, the UN’s High-Level Champions for climate action, in their preface to the report.

The World Economic Forum is re-examining the relationship between cities and healthy living through its Healthy Cities and Communities initiative, which is promoting innovative urban partnerships. This has resulted in range of global and local initiatives designed to help city residents better focus on their physical and mental health. It is also looking at integrating social justice and sustainable development in an effort to develop inclusive futures during and beyond the pandemic.

While the world tackles the health and economic consequences of COVID-19, two even more profound environmental crises have continued unabated – climate change and the accelerating destruction of nature. But just as these twin crises aggravate each other’s impacts, so actions to reduce atmospheric warming and the ravaging of ecosystems are mutually supporting.

Climate change and ecosystem destruction are not linear processes. The warmer and less biodiverse our world becomes, the greater the risk we cross tipping points of no return. One point is the melting of the Arctic tundra, releasing vast quantities of methane into the atmosphere – a greenhouse gas that is at least 25 times more potent than CO2. Another tipping point is the Amazon rainforest, huge tracts of which risk becoming savannah if action isn’t taken to stop deforestation.

The degradation of ecosystems is responsible for 23% of global climate change emissions, making it essential for governments and businesses to work harder to unify efforts towards tackling both crises. In July 2020, the Forum published the second report in its New Nature Economy report series, The Future and Nature of Business, which identified an ambitious range of nature-positive transitions in three systems – food, land and ocean use; infrastructure and the built environment; and energy and extractives.

The challenges in these three systems are breathtaking. Based on current trends of the growing global consumer class, food production alone would need to increase by 50%-98% by 2050 from 2005 levels. In urban environments – critical to driving economic growth, alleviating poverty and improving living standards – populations will increase by 1.5 million people a week until 2030. So how we design and build our cities will be vital for all our futures. Two Forum initiatives – Net Zero Carbon Cities and BiodiverCities – aim to harness the potential of cities as catalysts to stimulate low-carbon, pro-biodiversity urban living. Meanwhile, the negative impacts – in terms of air pollution and carbon emissions – of extracting and producing energy and raw materials equates to $9 trillion a year, more than 10% of global GDP.

The transitions proposed in these three systems would require $2.7 trillion a year between now and 2030 but could generate $10 trillion of business opportunities annually and create nearly 400 million new jobs over the next decade. Government has a key role to play in protecting critical ecosystems, framing the right regulations and aligning state subsidies and incentives with the restoration of nature, not its destruction. But voluntary action to shift corporate and personal habits towards sustainable consumption is also vital.

A major initiative by the Forum in support of restoring biodiversity is the 1t.org platform, which supports existing efforts to conserve, restore and plant 1 trillion trees by 2030, as part of the UN Decade on Ecosystem Restoration 2021-2030. The initiative seeks to raise the ambition of public and private sectors, remove the barriers to system change and connect reforestation champions on the ground with the resources they need.

Natural climate solutions – such as reforestation, protection of peatlands and cover cropping – can contribute one third of the cut in carbon emissions required by 2030 to stay on the Paris Agreement trajectory, according to the Forum’s forthcoming Nature and Net Zero report. These measures are significantly cheaper than other forms of CO2 removal and can be deployed immediately without waiting for technological breakthroughs. In addition to absorbing carbon, they deliver co-benefits such as safeguarding biodiversity, securing water supplies, improving soil health and steering resources towards developing economies by offering high-quality carbon credits.

Private-sector commitment to climate action is gaining momentum. The number of companies making net-zero commitments has doubled in the past year. Mark Carney, Governor of the Bank of England (2013-2020) and now the UN Special Envoy for Climate Action and Finance, said recently: “As more and more firms commit to net zero, they will increasingly need to show how they plan to meet their net zero targets through an appropriate mix of emissions reductions and offsets. This presents an enormous green investment opportunity, which can help generate large flows of private capital from advanced to developing economies and help fund projects from nature-based solutions to technological solutions like carbon capture and storage.”

The Forum has given its support to the Taskforce on Scaling Voluntary Carbon Markets, headed by Carney. The task force, which comprises experts from six continents, has released 20 comprehensive, tangible actions to deliver this carbon market at pace and scale. The overall aim is to create a set of “core carbon principles” to ensure that reductions and offsets adhere to the highest levels of environmental integrity.

So, which way will the balance tilt; towards or away from a green recovery? Sir David Attenborough’s latest series of films, Perfect Planet, includes a sequence shot in the Amazon, as rising rainwaters threaten an anthill with destruction. The ants work together at furious speed to evacuate the colony and build a living raft with their own bodies, which floats down the floodstream bearing their queen with her clutch of eggs. Their solution is highly precarious, yet it resonates with our own situation. The difference is that we still have a brief window of opportunity to prevent the flood. Let’s hope we take it.

A collection of initiatives relevant to the day has been created for those with access to the Forum’s online tool, TopLink.

The Davos Agenda provided the opportunity to launch a number of high-profile initiatives, saw climate issues discussed at the highest levels and brought to the fore a number of pressing issues. These will help shape the agenda for the international community in coming months and inform the Forum’s Annual Meeting 2021 in Singapore.

The following is a selection of insights that emerged over the course of the week covering the need to make food production more sustainable, harnessing circular technology, the moves needed to achieve net zero and how to mobilize action ahead of COP26.

Our current food system is failing people and destroying the planet. Two billion people lack access to sufficient safe and nutritious food. Meanwhile, the food system accounts for 25% of greenhouse gas emissions and it is the single largest driver of land degradation, deforestation and biodiversity loss. With the global population set to grow to 10 billion people by 2050, our food systems need radically transforming – and fast.

The transformations needed are technological, behavioural and policy-related. Science and the digitization of supply chains can help drive the technological transformation. Mengniu Group, the largest dairy company in China, has implemented a digital system to analyse the health of each of its cows, how much they eat, drink and produce. This is reducing the cows’ consumption of water and feed by 25%, greatly lowering the operation’s carbon footprint.

Mengniu is also driving behavioural change. Its products reach 90% of China’s 1.4 billion people, so it is uniquely placed to educate its consumers in improving nutrition and reducing waste. At present, 30% of all food worldwide is wasted – even as 270 million people are, according to the World Food Programme, on the brink of starvation. Consumers also need to be empowered to make better decisions, through clear labelling of each product’s carbon footprint. Creating this level of transparency throughout the whole supply chain will required legislation and technology.

Transforming global food systems and land use is also about helping the hundreds of millions of smallholder farmers to embrace regenerative agriculture, to lock in carbon and preserve biodiversity. But they need to be properly rewarded. “If we want to change food systems, the farmers need to be better off when they do the right things”, said Geraldine Matchett, Co-Chief Executive Officer and Chief Financial Officer, Royal DSM, Netherlands. The World Economic Forum today launched an initiative to create Food Innovation Hubs throughout Africa, Asia, South America and Europe, with the aim of connecting businesses with local innovators to tackle the food challenges of specific regions.

Political leaders and the public alike are perhaps unaware that “climate change is first and foremost a challenge to our sustainable food systems”, said Matchett. But this presents an opportunity as well as a risk. Climate-smart agriculture creates 40 jobs per million dollars invested, according to the International Finance Corporation – the highest job-creating sector of any industry. As the world fights the fallout of COVID-19, this could provide a sustainable and inclusive route out of recession.

A circular economy transformation could create 700,000 new jobs by 2040 and generate savings of up to $200 billion a year. But global leaders need to ramp up their ambition. The Netherlands is leading the way. “With COVID, we now have an opportunity to rebuild our economies in a circular way,” said the country’s Environment Minister Stientje van Veldhoven. Her country aims to halve its use of primary resources by 2030, with the goal of taking its economy fully circular by 2050. Recycling is only part of the picture – repair, reducing waste and extending product lifespans are all equally important.

The minister highlighted two vital elements for success. First, industry needs to collaborate throughout sectors, with the big players driving change through their entire supply chains. Second, governments need to realize how crucial the circular economy is for combatting climate change. Governments must frame the right regulations and incentives. For example, this year the EU will mandate the proportion of secondary materials that must be used in plastics products – a move welcomed by industry as creating a level playing field. States can also subsidize the circular economy to get it going. But ultimately it needs to stand on its own economic feet. Upfront investment costs will be outweighed by long-term gains in efficiency, according to Chew Shou Zi, President of Xiaomi, the Chinese smartphone manufacturer. His firm, with 250 million connected devices, has already reduced plastic packaging on smartphone sales in Europe by 60%. “We’re not only helping the planet, this is actually good for our business,” he said.

Entrepreneurs have a role to play as well as big business. In Nigeria, Bilikiss Adebiyi-Abiola co-founded WEcyclers, a social enterprise that helps people living in poverty to boost their incomes by collecting waste using bicycles. At first, she battled a lack of awareness and interest among poor communities, “but now they realize they can empower themselves with waste,” said Adebiyi-Abiola. She’s created 200 jobs, 10 franchise businesses and helped women earning less than a dollar a day to multiply their incomes by 10 or 20 times. The biggest issues she faced were lack of seed investment funding and an absence of government efforts to encourage people to recycle. Thing are, however, changing. Today, Nigeria – the largest economy in Africa – joined the World Economic Forum’s Global Plastic Action Partnership, to reduce plastic waste and boost recycling.

The top five risks facing human society are all environmental, according to the World Economic Forum’s Global Risks Report 2021. If the current rate of deforestation isn’t stopped, only 10% of our forests will be left standing by 2030. Meanwhile, we are losing our topsoil 100 times faster than it can naturally replenish itself. Yet more than one-half of the global economy depends on well-functioning natural systems. “Making peace with nature is the defining task of the 21st century,” said to Antonio Guterres, Secretary-General of the United Nations. Building a nature-positive economy has never been a more vital task.

Africa has experienced the first increase in extreme poverty for 20 years, due to COVID-19, nature loss and climate change. Wanjira Mathai, Africa director for the World Resources Institute and daughter of Nobel Prize-winning Kenyan environmentalist Wangari Maathai, has a four-step plan to reverse this crisis:

1. Produce our food more efficiently and regeneratively – 30% of food is wasted and populations are on the rise.

2. Protect standing forests – “they are incredibly important – we have to protect them like our lives depend on them,” she said.

3. Reduce carbon emissions and waste – 90 tonnes of material is used to meet the functions of each human being per year, but only 9 tonnes are cycled back into the economy.

4. Restore – we have to plant the right trees in the right places. Mathai referenced the Great Green Wall, an African-led movement with an epic ambition to grow an 8,000km swathe of trees and plants across the Sahara and Sahel.

Global businesses have a key role to play in cleaning up operations throughout their supply chains. Fashion, for example, accounts for 10% of global greenhouse gas emissions, the second-worst industry in the world, according to Marco Bizzarri, Chief Executive Officer of Gucci. His company has taken its entire supply chain carbon neutral. Gucci has paid to protect and restore forests and mangroves, and has helped farmers transition to regenerative agriculture through pre-paid carbon credits and investment.

The private sector needs to report its progress on sustainability in the same way it reports on profitability, said Roberto de Oliveira Marques, Chief Executive Officer of Brazilian cosmetics brand Natura & Co. Over 20 years, Natura has worked directly with more than 30 communities to preserve 1.8 million acres of Amazon rainforest – one-half the size of Holland. In addition to greater corporate transparency, there is an urgent need for a standardized way of tracking and measuring the environmental footprint of individual products, so that consumers can make more informed choices, said Jim Andrew, Chief Sustainability Officer of PepsiCo. Andrew was among several top businessmen who called for a price on carbon. “That will align incentives”, he said. “If you have something that pulls from farmer to consumer, the red thread, it will unleash innovations and economic incentives,” he added.

Trillions of dollars are needed to finance the transition to net-zero – especially in hard-to-abate sectors such as shipping, aviation, cement and steel. But despite 127 countries committing to net zero, the cash isn’t yet flowing in sufficient quantities. Mark Carney, UN Special Envoy for Climate Action and Finance, said that he’s expecting banks and investors – especially the big pension funds and sovereign wealth funds – to make commitments by November at the latest, when COP26 takes place in Glasgow. Laying down a challenge to all businesses, Carney said: “If you’re not part of the solution by November, you will have made a conscious decision not to be aligned to net zero – it’s a net-zero COP.”

At the meeting, the World Economic Forum launched its own effort to decarbonize the heavy industry and transport sectors: the Mission Possible Partnership. This coalition brings together more than 400 companies, along with their customers, suppliers, bankers, shareholder and regulators, to forge net-zero means and the actions necessary to achieve them. The partnership is targeting the seven highly carbon-intensive sectors of shipping, aviation, steel, trucking, chemicals, cement and aluminium, which together comprise 30% of global emissions.

It’s also “exceptionally important that the MDB community gets aligned,” said Carney. Multilateral development banks can help unlock very large blended finance flows to emerging economies, typically by funding the riskier start-up stages of new climate-friendly projects. But the International Finance Corporation’s Chief Operating Officer, Stephanie von Friedeburg, said “there’s a lack of bankable projects”. The IFC is working to bundle and de-risk projects in a way that’s attractive for commercial investors. In Zambia, for example, they worked with the government to create a core pack of bid documents for solar projects that reliable operators could understand.

“What we need,” said Werner Hoyer, President of the European Investment Bank, “is patient capital, long-term commitment and a bit more courage from the public sector.” Governments need to commit some of that patient capital investment themselves, along with providing tax credits and subsidies for consumers, greening their procurement processes and renewing efforts to put a price on carbon.

Carney elaborated his own four-point plan for how governments could shift markets and unlock net-zero financing, through a combination of pricing, regulation and forward commitments:

1. Carbon pricing: Canada, for example, has set a forward price on carbon, rising to $170/tonne by 2030. There is “incredible value to have a credible path” because the market will smooth the adjustment and pull it forward. By the time the price is high, the market will have already adjusted.

2. Moratorium on internal combustion cars by 2030: that would tell industry and investors where that sector is going. Even if Europe started, it would have global impact. “Forward commitments make a difference,” said Carney.

3. Commitments to purchase new technologies early: we’ve seen it with COVID-19 vaccines and in the power industry. Governments that committed to buy down solar and wind power, enabled those technologies to become more competitive – as happened with the UK’s offshore wind industry.

4. Invest in hydrogen: This could help decarbonize shipping. Governments could make advance commitments or mandate minimum fuel blends to pull forward that demand.

Al Gore, Vice-President of the United States (1993-2001), Chairman and Co-Founder, Generation Investment Management, cautioned that the political resistance to carbon pricing is still significant, not least because of the strong oil and gas lobby. “Whether we muster the political will to put a direct tax on these emissions remains to be seen,” he said, adding: “Regulations are more feasible.” But despite the obstacles, Gore remained positive: “We are in an almost unprecedented global transition,” he said, adding: “Many call it the sustainability revolution.”

In the five years since the landmark Paris Agreement on climate action, we have seen emissions rise year-on-year and, despite COVID-19, the period 2016-2020 looks set to be the warmest five years on record. Today, we’re on track to hit between 4.1° and 4.5°C of warming by the end of the century, said John Kerry, Special Presidential Envoy for Climate, National Security Council (NSC), addressing The Davos Agenda. Even 3.5°C warming would be catastrophic, having seen the disasters that come with our current 1.2°C of warming, he said. In this “decisive decade for action” the goal for the Glasgow COP26 meeting in November must be for “all countries to have road maps and benchmarks starting this year, not 2050 targets,” said Kerry.

National targets can only get us one-third of the way to net zero, said Ben van Beurden, Chief Executive Officer of Royal Dutch Shell. Governments can tackle power generation, personal mobility and homes, but that still leaves two-thirds of emissions for businesses to deal with, in collaboration with governments. “We need an ambitious approach in Glasgow, sector by sector where suppliers and users of energy come together to figure out how to get their sector to net zero,” he said, adding: “It’s harder than countries getting to net zero.”

Feike Sybesma, Honorary Chairman, Royal DSM, called on all businesses to play their part in three key ways:

1. To commit to reducing their own emissions.

2. To be transparent on their emissions and on the financial consequences to their business of climate change.

3. To be clear on which policies they need from government, such as carbon pricing.

Sybesma is a leading light in the World Economic Forum’s Alliance of CEO Climate Leaders, which today renewed its call on all Forum members to make their net-zero commitments, in line with the Forum’s Net-Zero Challenge initiative. Fellow corporate leader, Jesper Brodin, Chief Executive Officer of IKEA, said the reasons for chief executives to sign up were clear: the consciousness of customers and employees around climate change has spiked, and sustainability is the smart, affordable new way to do business.

Kerry said that the US was rejoining the Paris pact with “humility and ambition” after an “inexcusable absence” of four years. He congratulated Europe and other countries, including China, on their net-zero commitments, while noting that China was funding 70% of coal plants around the world. At Paris, developed countries were urged to scale up their support for climate action in developing countries to $100 billion per year by 2020. It hasn’t happened.

“We’ll have to fight for the billions”, said Kerry, but added: “The trillions may be easier.” He is pinning his hopes on the private sector as “the saving entity” here, driven by the enormous business opportunities of transforming global power generation, industry and transport. By 2050, there will be 9 billion energy users – the largest market the world has ever known. “I believe market principles are going to help us move faster than we ever imagined,” he said, pointing to the rapid rollout of solar and wind power as evidence. Telling the Forum’s virtual participants that “it will take a warlike enterprise” to bend the warming curve, Kerry concluded by saying: “Glasgow is the last, best chance we have … the world has high expectations – we have to meet them.”