Talk is cheap—but there are encouraging signs that corporations and countries alike will walk the walk.
The coronavirus pandemic overshadowed nearly everything in 2020, but alongside the pyrotechnics of an extraordinary U.S. election and the resurgence of social justice activism, at least one more big-picture issue came to the fore: this was the year the “net zero by 2050” climate commitment went mainstream.
The promise to cut greenhouse gas emissions as much as possible within three decades, and offset any emissions that remained, now serves as a benchmark for meeting the goals of the Paris Agreement: to keep global temperatures from rising less than 2°C, and ideally below 1.5°C, within this century.
The pledge to reach the target by 2050 or earlier was already gaining momentum by the end of 2019 among corporations and countries alike, including the U.K., Amazon, and Nestlé. 2020 was on track to be a landmark year for action on climate change. The COP26 conference in Glasgow, originally set for November but now rescheduled for the same month in 2021, was primed to be a moment to take stock of how far climate commitments have—or, mostly, haven’t—come in the five years since the Paris Agreement, from which the U.S. withdrew in 2017.
Then the pandemic hit. COP26 was just one of many conference casualties, of course—but climate commitments kept coming despite predictions that action on the issue might completely fall by the wayside as the world battled the virus. 2020 saw Japan, South Korea, and Canada officially promise to target net-zero by 2050 as the EU solidified its own goals and China, the world’s largest emitter, said it would target 2060.
Fortune 500 and Global 500 companies, too, rushed to announce their own 2050 targets, including Facebook, General Mills, and Mercedez-Benz, not to mention some of the world’s largest oil and gas companies, such as BP and Shell.
There’s a catch, of course. Commitments are just that—commitments, and often with few details filling out the exact path to eliminate emissions, including the scale of investment and changes to assets needed to meet the target in the intervening years. As the idiom goes: Talk is cheap.
Energy agencies and experts had already noted the pronounced gap between what countries had promised to do and the steps they actually took to meet those targets. In 2021, the challenge will be to see whether those details start to arrive—or whether the gulf continues to widen.
“[2021] is a very important year, when it comes to some of these possibilities moving from aspiration to, all right: what are the physics? How are we going to do this? How are we going to reduce emissions?” says Dan Klein, head of energy pathways at S&P Global in New York.
Here are a few key questions to watch out for this year.
The election of Joe Biden to the U.S. presidency marked a potentially major shift in American climate policy: Biden has called climate change the “existential threat of our time,” promised that the U.S. would rejoin the Paris Agreement, and pledged to back clean-energy policies and electric cars—through executive action, if necessary. That could provide a jolt of energy to global climate efforts after four years of the U.S. being largely absent from the table.
But Biden’s long-term success in reestablishing progressive U.S. climate policy comes down to yet another election: whether the Democrats will take control of the Senate after the run-off elections in Georgia, which will take place on January 5.
“So much depends on the Georgia runoff, and the courts, and Congress, supporting or constraining what he wants to do,” says Simon Flowers, the chairman and chief analyst at Wood Mackenzie, the Edinburgh-based energy consultancy owned by Verisk.
His pledge to address climate change also comes at a challenging time—with the U.S. facing down the economic impact of the pandemic, and nearly 10 million people unemployed.
“I think we shouldn’t forget that the economy is probably going to be his first priority,” Flowers says. “So you’re maybe we don’t see a great deal in 2021.”
Any climate effort risks failure, however, without the inclusion of the world’s largest emitter: China.
In September, the Chinese government said it would target net zero by 2060—ten years after most nations, but a clear deadline nonetheless. But while the target seemed to imply a new seriousness to shift China’s vast industrial might in a different direction, huge questions remain, including about the continued dependence on coal—which still makes up 62% of the country’s power generation, as Fortune noted in October—and the interim timelines for hitting that target.
“We’ve still got 10 years of growth in [emissions in] China,” under that target, with emissions only expected to peak around 2030, noted Chris Midgley, global head of analytics at S&P Global.
The pandemic, too, raises questions about how exactly China’s pandemic recovery will play out, with some of the policies to bounce back notably energy intensive, says Klein.
“You could even make the leap that it’s CO2 intensive—where you’re building new infrastructure and things that not only take a lot of energy to produce, but will take a lot of energy to maintain and use over their useful lives,” he says.
While politicians and climate experts tout the many opportunities—on top of the mortal risks—that come with a low-carbon transition, the upfront costs and investment don’t come cheap.
The EU has led the way, with a €750 billion COVID recovery package, which had a distinctly green emphasis, and a focus—even if its goals faced last-minute resistance from member-states like Poland that still have an energy reliance on coal. Meanwhile, the Biden administration touted a $2 trillion climate plan on the campaign trail—with no assurances that such a deal would be passed.
“Europe is clearly saying yes, we are going to spend money,” says Flowers. “And I think there are questions if it is enough, but they are definitely not shy about saying we are going to commit euros to this.”
The U.S. commitment is “questionable”, he adds, while around the rest of the world, “we still haven’t seen that move to say, yes, we’re going to fund these investments and pay for it.”
Complicating that momentum is relatively low oil and gas prices, after the historic drop in demand caused by the global lockdowns undercut prices. Brent crude, for example, is still down nearly 22% from one year ago, as waves of lockdowns have undercut demand for transport fuels in particular. Getting consumers, many of them hard hit by the economic impact of the pandemic, to buy into potentially higher energy costs.
“If your budget is crunched this year, and you need to spend more money up front, maybe you won’t buy that electric bus. And so there is that sort of challenge of this energy transition, that fossil fuel prices are low, especially now,” says Flowers.
As any climate expert will tell you, every year counts in the transition to a low-carbon world. And the scale of the shift must be tremendous.
While more “net zero by 2050” commitments in 2021 will be a sign that momentum is building, they must come both along shorter-term targets that lay out a detailed road to 2025 and 2030, alongside material shifts in how countries, and companies, operate—in just the next few years, experts say.
For legacy oil and gas companies such as Shell and Equinor, which have committed to hitting that 2050 goal for both their own operations and their products, that will likely mean a flurry of acquisitions and sales. Portfolios will change quickly and dramatically, predicts Flowers.
Those shifts must also be visible in the clear expansion of workable, affordable technologies and assets—mass-scale wind and solar, in particular, and the growth of electric grids to bring that power to new areas of the economy, including transport—over options that are still in their infancy.
For example green hydrogen, an area of huge investment for countries including the U.K., Australia, and South Korea, is phenomenally buzzy and offers huge opportunities—but remains tiny in scale, deeply unprofitable, and years behind mainstream renewables. In order to reach affordability at all, it will need aggressive government support, experts say. But there are signs that this year’s commitments will mean big shifts are on the near horizon.
“Coloring in the gap between 2021 and 2050 is a big question on people’s mind,” says Flowers. “But I think you will start to see things move.”
