For five seconds in February, the UK was beating world heat records. This was not an extreme weather event caused by climate change, although the country recorded its highest temperature ever in July. Instead, it was researchers at the Joint European Torus in Culham, Oxfordshire – the home of the UK’s nuclear-fusion work – whose experiment produced a record amount of output energy. There were many exciting developments in fusion in 2022, but it is also just one of myriad climate technologies that provide hope for the future. As global leaders and delegations gather at COP27, the critical question is: how do we develop, scale and deploy these technologies at greater speed?
Climate tech has been through a previous false dawn. But in recent years advancements in solar, wind and battery technology have surpassed International Energy Agency forecasts, indicating that a new global energy economy is emerging. This belief has also been buoyed by the demand for electric vehicles (EVs). In September, Tesla’s Model Y became Europe’s top car in terms of new sales. And in countries like Norway, nearly 80 per cent of new-car sales in October were electric. In other areas of climate tech such as carbon capture, geothermal energy and even nuclear power, there has also been remarkable progress.
Despite the promise of climate tech – which provide genuine reasons to be optimistic – progress in bringing it to market at scale it still too slow. Some of this is due to technical barriers, but for years countries around the world have set out a number of net-zero strategies and often have fallen short on delivery. Underinvestment in tech has been one factor, particularly in hard-to-solve challenges such as construction. But most significantly, the global community has not yet found a comprehensive way to tackle the underlying systems-level challenges of tech (and sometimes the trade-offs that these present).
Taking action on climate change requires collective action, but so far too little has been done to assist low- and middle-income countries (LMICs), where the potential positive impact is huge but the best climate-tech solutions are yet to reach the market at scale. The war in Ukraine has meant many governments are more aware of these markets, particularly as they look to solve energy issues at home. Given the disparities in emissions and consumption, as well as wealth and technological capacity, it will require a new bargain. Some of this will be about technological leadership and transfer, but it is also a question of capital: in Africa, for example, estimates suggest it will take around $30–40 billion of investment per annum until 2025 just to achieve universal access to electricity.
With the cost of the wider energy transition set to be much higher, wealthier nations need to show more leadership. Along with the private sector and other actors, they need to step up and address the challenge of developing, scaling and deploying climate tech in the markets where it matters the most. Three areas are particularly important:
The first challenge is leveraging the tech. At COP26, the US made a significant move to spur the commercialisation of emerging technologies with the First Movers Coalition, but too often governments are not grasping the potential benefits of technology. This is despite the number of technologies being developed and prototyped, as well as the success of renewable-energy solutions. Some of this requires political will, but more important is the need to create markets. Without sustainable demand, innovation will fail. This is a universal challenge. In countries like the US and the UK, technology lock-in from the previous century contributes to weak demand signals. But the challenge is more acute in LMICs where markets are weaker. In Africa, for example, there’s an opportunity to maximise the continent’s 10 terawatt solar-energy potential through regional power pools. But the challenge of cross-border coordination limits the advancement of solar technology in such regional markets.
Second is the need to close the finance gap. There are some hugely encouraging signs here: climate-tech investment rose to record levels in the past five years and is set to rise even more in the next five. But climate finance needs to grow nearly sixfold to meet the goals of the Paris Agreement. There are also imbalances in both the sectors and the geographies that see this investment. Around 90 per cent of investment, for example, goes into mitigation, mostly in renewables, while adaptation gets the short end of the stick, leaving millions of lives vulnerable. It is important to go deeper in addressing the difficult decarbonisation challenges related to industry, such as steel and cement, but financing and adaptation – which is a necessary reality – both need more focus as well.
In geographical terms, the investment gap is vast: more than 75 per cent of climate-tech funding is concentrated in East Asia, Western Europe and North America. Within East Asia, China also accounts for nearly all the funding. The role that these countries play in scaling the tech will of course be critical, and tech transfer to deploy at speed is also key but there needs to be greater effort made in getting this investment into LMICs. To a degree this is a matter of perception, as some investors believe these countries to be too risky, but a lack of follow through on investment plans creates genuine risks. New mechanisms and instruments are necessary, including blended finance, as well as partnerships such as the one between the EU and Breakthrough Energy Catalyst. A similarly bold catalyst fund for LMICs could be transformative.
Third is the need to harmonise the policy and the politics. COP26 resulted in a number of promises – from the group of 12 countries who committed to spending $12 billion on forest conservation and the group of 39 governments who pledged to end overseas finance of fossil fuels by end of 2022 to the 103 governments who signed up to cutting methane emissions to 30 per cent below 2020 levels by 2030. But in the face of a global energy crisis and rising energy bills, whether and how well these countries will deliver on their commitments remains uncertain. The failure of rich countries to follow through on their climate-finance pledge of $100 billion at the 2009 Copenhagen Summit has not been forgotten, and nationalism and global tensions between right- and left-wing politics put follow-through on climate commitments at risk. Government subsidies have helped stimulate manufacturing of batteries and EVs, with the US recently taking further measures to incentivise adoption, albeit with policy that has been critiqued as protectionist.
While LMICs can certainly develop in a less environmentally damaging way than Europe or the US did, these countries cannot be expected to hold back progress at their own expense. The transition to low-carbon economies and societies will not be painless and there will be trade-offs to confront, but it is clear that we need bolder action to deal with the reality.
Politicians often lag behind on the need to decarbonise, leading to understandable pessimism. Fortunately, the economics of clean energy are quickly changing, and for the most part it’s clear what we need to do. We also have the ingenuity to develop the new clean technologies that are necessary, many of which innovators are moving at pace on today. But we haven’t yet had enough creativity in deploying the powerful climate tech available at the scale that is necessary.
This is the challenge facing the leaders gathering at COP27. But it is also an opportunity.
Earlier this year, a team from the Institute had the honour of visiting the fusion centre in Culham – the hottest place in the universe. It was mind-blowing to witness first-hand what human ingenuity can create. Maximising this ingenuity to fix climate change is what we must now achieve together.