Why government must flex all its green muscles
March 22, 2022
March 22, 2022
If the world is to mitigate the worst outcomes of climate change, the goal has been made very clear: limiting temperature increases to well below 2°C. To get there will require transformational efforts – and businesses achieving net zero emissions by 2050 has to be one of the main aims. To gauge their progress towards that target, Accenture’s recent research surveyed more than 1000 companies in Europe.
So what does the research show? While there are some causes for optimism, the overall picture looks less positive. Approximately two-thirds of companies have not yet even set science-based targets for net zero. However, companies also agree that accelerating progress is non-negotiable. They understand, too, that their current actions are not sufficient to limit warming to below 2°C and achieve net-zero by 2050.
While there is a clear willingness to act among private sector businesses, there's less clarity about the most effective route forward. Yet if the private sector does not start to make faster progress, governments may be forced to impose much more binding targets and stringent regulations. These would likely create significant disruption and losses to those industries that are among today’s largest carbon emitters.
That’s not a scenario that anyone wants to see. As a result, there is a strong and growing consensus that achieving faster progress and more sharply ‘bending the curve’ will depend on how well the private and public sectors can come together to make the great leaps forward that are needed.
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Governments and the public sector will be at the centre of efforts to mitigate climate change. They uniquely occupy multiple roles – regulator, buyer, owner/operator, innovator, investor, influencer
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So how can governments and the public sector help create the incentives and enabling conditions that will allow industry to move forward faster? In my view, government has multiple roles to play here.
At the macro level, there are the international agreements and targets that arise from meetings such as COP 26. Then there’s the formation of regional and national regulations and policies to guide and incentivise the private sector. For example, the EU is setting standards for vehicle emissions, as well as non-financial reporting and the taxation of energy.
But governance and regulation are only two of the positive contributions that government can make.
Innovation will be essential to develop the cutting-edge technologies that will help mitigate the effects of a changing climate. The EU Innovation Fund, for example, has dedicated €25 billion to support the commercial development of low-carbon technologies. These include hydrogen as a fuel for the future or the development of carbon capture, utilisation and storage (CCUS). By seeding and stimulating private sector investment, governments can help remove some of the risks inherent in developing leading-edge technology. What’s more, they can also foster a favourable environment for innovation to flourish and accelerate.
Governments also have a role as direct investors in green public infrastructure. And we’re already seeing this around the world, with large scale investments in renewables, electrifications, hydrogen, and so on. Stimulus programmes agreed in response to the pandemic, such as the EU’s Recovery and Resilience funds, have dedicated a significant proportion of capital to green infrastructure projects and carbon reduction.
And of course, governments with operations from defence to health, education and housing, are also emitters themselves. While they are responsible directly for only a small proportion of overall emissions (approximately 1%-2% according to Accenture analysis), governments will nevertheless need to lead by example and ensure that the public services they control achieve net zero within at least the same timeframe as others.
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What’s more, government’s public procurement makes it a sizeable economic actor, employing millions of people, occupying many premises, and buying a large volume of goods and services. And that economic clout lends it considerable influence to create more responsible and circular supply chains, lower the carbon footprint of the goods and services that it buys and develop an ecosystem of green suppliers and vendors.
Finally, national and local governments also have uniquely strong connections and access to citizens/consumers. They can use that position to influence and persuade individuals to make more sustainable choices and take positive steps to change the environmental impacts of their behaviour. For example, the UK’s residential sector is responsible for about one-fifth of the country’s emissions. So government’s influencer role is critical when it comes to nudging behaviours, including how people consume (for example through energy labelling), how they move around (for example with urban road pricing or banning short-haul internal flights) and how they live. Taken together, all these could have an impact of real consequence on greenhouse gas emissions.
Governments and the public sector will be at the centre of efforts to mitigate climate change. They uniquely occupy multiple roles – regulator, buyer, owner/operator, innovator, investor, influencer – each of which can positively impact. They all have to be marshalled to provide the best chance that the planet can not only meet near-term carbon targets, but transit on to a more sustainable economy from which everyone benefits.
I would be very interested to hear your views on the multiple roles that governments can play to address climate change challenges. Please get in touch.
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