How To Create A Sustainable Economy

A successful transition to a sustainable future will depend on international collaboration and transformations across multiple sectors.
Here are eight recommendations for policy-makers to hasten the green revolution.

There has been much discussion over the past few years about the 'energy transition'. The underlying premise is that the transition to lower and zero-carbon energy sources should be accelerated to mitigate the impact of global warming. The current pandemic is shining additional light on global interconnectivity and the need to collaborate and share best practices.

Much of the focus today is on decarbonizing electric power production via renewables, but only about one quarter of global GHG emissions are from electricity. The industrial sector (refining, petrochemicals, fertilizers, cement and steel production) together generates about 21% of GHG emissions. At present, only 15% of industrial energy use is derived from electricity. Shifting the world's transport sector, which accounts for circa 15% of global emissions, from oil-based to low carbon fuels will also require a diverse set of technologies.

As governments across the world consider implementing fiscal incentives to combat the economic downside from COVID-19 and to offset the threats posed by climate change, there are many opportunities to benefit from the sustainable revolution. Here are eight recommendations to consider for immediate implementation:

1. Ensure stimulus packages shape a sustainable future

When clean economy jobs are put at the centre of stimulus programmes, both a long and short-term jobs-boost across a diverse workforce is achieved. After the great recession in 2008, hundreds of thousands of jobs were created across the world as countries rolled out wind, solar and grid projects. Going forward, government stimulus could be used to support labour-intensive work such as energy-efficiency projects in buildings and industry. In addition, any support for carbon-intensive industries should include a commitment to carbon reduction.

2. Invest in the future

Rather than bail out the 'past', the better response is to enable businesses to become leaders in the future by enabling investments in technologies such as batteries, hydrogen, electric transportation, and AI, and in areas as diverse as sustainable agriculture, clean environment and clean food. It is also critical to invest in under-capitalised developing countries which are the growth markets of the future, and which are critical to meeting climate goals. Long-term government policy has traditionally inspired private capital and would potentially super-charge a global sustainable revolution.

3. Empower the consumer!

The more engaged the consumer, the greater the likelihood that stimulus packages will make positive impacts. Transparency is important and product efficiency standards for household goods or automobiles help provide this to consumers. Incentives and fees can also shape consumer behaviour and drive clean investment. One example is a 'cash for clunkers' programme which incentivises the purchase of cleaner vehicles, improving the climate and reducing air pollution.

4. Create a level playing field for clean energy

Across the world there are subsidies or taxes in place which benefit the incumbent fossil fuels industry at the expense of low-cost clean energy. In Germany, for instance, retail consumers pay up to 30 euros cents per kWh for electricity while gas or oil for heating purposes is only 7 cents. The introduction of a carbon fee would motivate badly needed investments in clean infrastructure, provide regulatory certainty to investors and businesses, and create a wave of entrepreneurship that can quickly stimulate the economy and benefit the environment.

5. Modernize existing infrastructure

Over many years, facility infrastructure has been allowed to deteriorate and many now lack modern technology and physical infrastructure to maintain safe, efficient, resilient and flexible operations under emergency and new normal conditions. The guiding principle for infrastructure renewal should be to build back better. Renewed facilities must meet modern standards for energy efficiency and air and water quality, and minimize long-term operational costs. Facilities should also have resilient, decentralized energy systems and be able to adapt to public health or emergency situations.

6. Simplify government bureaucracy

One big obstacle to investments in clean energy is complex and burdensome regulation. For example, rooftop solar installations in most of the United States are twice as expensive as they are in Germany and take three times as long due to complex permitting regulations and cumbersome installation laws. These types of barriers exist in multiple countries across the entire energy sector, illustrating the need for simplified accreditation and permitting processes.

7. Encourage state-of-the-art electricity system installations

Electricity companies across the world have done a very good job of maintaining electricity reliability despite the coronavirus. The crisis has also shown that our power system can operate with greater amounts of intermittent renewables than previously thought. However, negative prices and increasing price volatility showed us that there is a limit to what the current system can do. Going forward, the electrification of transport and buildings (acting as "prosumers") is the next big opportunity and challenge for power systems, driving the need to strengthen and digitalize the 21st century distribution grids.

8. Incentivise energy sector restructuring

The fossil fuel industry, from shale oil drillers in Texas to coal miners in China, is in economic distress. Much of the industry will have to go through significant restructuring, causing local economic impacts. Financial incentives need to fund the transition to the clean energy economy and convert shuttered fossil fuel plants to alternative uses such as data centres.

What's the World Economic Forum doing about the transition to clean energy?

Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum's Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world's largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

To future-proof the global energy system, the Forum's Shaping the Future of Energy and Materials Platform is working on initiatives including, Systemic Efficiency, Innovation and Clean Energy and the Global Battery Alliance to encourage and enable innovative energy investments, technologies and solutions.

Additionally, the Mission Possible Platform (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission.

Is your organisation interested in working with the World Economic Forum? Find out more here.

Building momentum

In summary, these eight recommendations can help lead the way towards a low-carbon, clean energy future. By using the momentum prompted by the global pandemic, a "can do" attitude from our political leaders, global businesses and local communities, provide awesome opportunities to build a sustainable future globally now. It is, perhaps our biggest opportunity to do good across the world.

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