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3 November 2021

Solving the net-zero equation: Nine requirements for a more orderly transition


As leaders prepare for COP261 at the end of this month, the need for addressing the looming climate crisis seems to be grasped more broadly than ever before.2 Already, 74 countries—accounting for more than 80 percent of global GDP and almost 70 percent of global CO2 emissions—have put net-zero commitments in place.3 And more than 3,000 companies have made net-zero commitments as part of the United Nation’s “Race to Zero” campaign.4 Capital markets are increasingly building emissions risk into asset prices, and venture investments in transition technologies are at an all-time high. For their part, an ever-greater number of companies are recognizing how shifting investor preferences—as well as changes in technology, regulation, and consumer behaviors—are changing the basis for competition and are calling for an altogether greater level of global and local collaboration.

Yet, these developments do not mean that net zero is in sight. The well-known words of Winston Churchill, pronounced in another context, seem to apply here too: “Now is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” Indeed, the struggle to reach net zero requires the world to both rapidly reduce greenhouse-gas (GHG) emissions to the greatest extent possible and also preserve, regenerate, and develop the natural and man-made stores of greenhouse gases to balance all that cannot be reduced. Today, however, emissions continue apace without sufficient abatement and are not counterbalanced by removals. Nor can the goal be achieved on the current trajectory. Indeed, while the International Energy Agency’s World Energy Outlook report, released earlier this month, acknowledges that the transition to cleaner energy sources is occurring at a rapid pace, it also highlights that it is still not aligned to a pathway that would stabilize global temperature increases at 1.5°C and achieve other energy-related sustainable-development goals.

Article (23 pages)

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