Change is rarely, if ever, linear, and some of the biggest changes in history have seemingly happened overnight, especially when it comes to technology. What was the moment – “the tipping point” - when smartphones became ubiquitous? The same can be asked of technology that’s not only necessary in the transition to a low carbon economy, but critical in the fight against climate change.
“I think one of the most interesting thing to come out of COP26 last year was the Breakthrough Agenda,” says Palladium’s Tom Gegg, Nature Based Solutions Technical Lead. “Several governments, and business leaders like Bill Gates, essentially acknowledged that for big sectors of the economy, especially those that rely most on fossil fuels at the moment, change will not necessarily be linear.”
According to Gegg, the transport or energy sectors may not take 30 years to gradually transition to low carbon alternatives; instead this transformation could happen very quickly, but that’s only if we can trigger a positive tipping point.
The technologies we need to tackle climate change (be they heat pumps, electric cars, wind turbines, solar panels, or batteries) already exist, and they are rapidly becoming affordable. Now they just need to be scaled up, very, very fast.
This might seem obvious but as a recent report in The Economist notes, this massive scale up in deployment will require far more money than has already been promised via COP pledges. “Roughly speaking, global investment in clean energy needs to triple from today’s US$1 trillion a year, and be concentrated in developing countries” says the report. And this finance can’t come from governments alone.
Gegg points out that another major commitment to come out of COP26 was developed countries making it easier for the private sector to invest in and finance green technologies in the developing world, thus supporting their low carbon transition. “This funding is not grants or donations though – it’s potentially one of the biggest investment opportunities of our generation,” Gegg explains. “The technology and the products are there, they work, and they are affordable - so the question is how do we get the finance and investment into them?”
It’s on governments to help the private sector feel more confident about investing into these new areas, “for example by providing a guaranteed offtake contract to a solar farm for the energy it will eventually produce, so that an investor knows they will see a return, or blending public and private capital on the investment side to reduce risks of losses,” says Gegg.
In essence, we need to trigger tipping points across several sectors that will unlock this massive investment into the deployment of green tech.
This can be done through the coordinated deployment of private finance to create larger economies of scale and solutions, especially in developing countries where it’s needed the most. “In scaling up, we’re essentially harnessing the self-interest of the market by creating investments in proven technology, Gegg says. “Investors know that they will get their money back and make a profit. We’re seeing it this year with exponentially growing investment into electric vehicles in some markets.”
“We need to see the same thing happen across multiple sectors in all markets.”
But it’s not down to only governments and investors to make this tipping point happen. “You need a catalyst in the middle, someone accustomed to working with policy makers in developing countries, asset managers, local infrastructure firms, and development finance institutions, and who can bring them all together to build the right enabling environment,” Gegg explains.
He points to programs and projects like Partnerships for Forests, which catalyses finance into businesses that deliver on commitments for deforestation and reduce the pressure on forests, or Mentari, which is supporting a low carbon energy transition in Indonesia by working with policy makers to finance solar grids, or the work of Palladium capital advisory team in catalysing investment into renewable energy in emerging markets. “These catalytic projects are parts of the solutions we need globally to trigger tipping points.”
Yes, the tipping point is near, and it will require a massive deployment of capital, enabled by unprecedented collaboration and cooperation across sectors and governments. But will there be further movement on the Breakthrough Agenda at this year’s COP27? Gegg isn’t sure, but he is hopeful. “We just need to reach those tipping points sooner rather than later, and once we do, then the market can drive the scale up of the green technology faster than I think people expect.”
For more, read "'We Have to Have Real Plans': Palladium Employees Share their Hopes for COP27" or contact firstname.lastname@example.org.