Decarbonizing the Global Economy

August 19, 2020

The earth’s climate is always changing. In the last 650,000 years, there have been seven ice ages. When the last one ended about 11,700 years ago, the modern climate era began. It only took a temperature increase of 4–7°C to melt the ice sheets and create the conditions that would allow human civilization to flourish.

Climate scientists attribute these historical cycles to minute variations in the earth’s orbit, which change the amount of solar energy received. At the same time, the amount of CO2 in the atmosphere has never been greater (Figure 1), suggesting a strong correlation with rising temperatures and the extreme weather events that have become the norm. Bushfires rage with greater frequency. Hurricanes grow fiercer. At the rate glaciers are melting, the Arctic will be free of summer ice by 2050. By 2100, 1-in-20-year extreme heat days are projected to occur every other year.

Entire ecosystems are collapsing, accelerating the feedback loops that follow. As the ice caps melt, sea levels rise, methane—a greenhouse gas 20 times more powerful than CO2—is released, and the albedo effect, which describes the ability of the earth to reflect solar radiation, diminishes. Animals cannot adapt fast enough, and local communities are being forced to move. “Climate refugee” has entered the vernacular.

Causal Debate

Despite mounting evidence, it was not until the late 1980s that the greenhouse effect and humanity’s role in causing it became broadly recognized. It started with the Montreal Protocol, which recognized industrial activity’s role in depleting the ozone layer. Yet after more than three decades, the complexity of climate-related data, coupled with entrenched political and economic interests, has protracted the debate on the causes of climate change.

Rather than dig their heels in, several organizations are sidestepping the debate, taking actions to promote a decarbonized economy. A common thrust of these initiatives is improving the flow of information and disclosure on climate-related risks. Though a far cry from the much-needed globally coordinated regulatory response, these are critical precursors to a comprehensive market response.