Carbon Neutrality: This Century’s Biggest Opportunity
Since the Paris Agreement in 2015, organisations worldwide have been encouraged to take immediate action to reduce carbon emissions. While there are model innovations to look to, there are so many other understated avenues for contributing to upcoming developments.
To give a foretaste of what’s to come in his Masterclass for The Room, entrepreneur, business innovation consultant and Room member Alex Kalanda shares some of the opportunities business leaders can tap into while making a difference.
With roughly 65 million cattle, Ethiopia has the largest livestock population in Africa. Unknown to many local farmers, cows burp a powerful greenhouse gas called methane during their digestive process. Over a 20-year period, methane has a global warming potential that is 84–86 times that of carbon dioxide and 28–34 times that of carbon dioxide over a 100-year period. Worse still, methane is a precursor to ozone, another greenhouse gas. Each gas’ effect depends on 3 key factors: how much of it is in the atmosphere, how long it stays in the atmosphere and how strongly it impacts the atmosphere.
It is by understanding fundamental climate science and the factors that warm our planet that the numerous opportunities to combat climate change become apparent. Our eyes open to possibilities of building new technologies, drafting new policies and creating new business models that will help accelerate our journey to net zero.
According to McKinsey & Company, reaching net zero emissions will require a transformation of the global economy. $9.2 trillion will need to be spent per year on average from 2021 to 2050, amounting to $275 trillion on physical assets for energy and land-use systems in the net zero transition. This means an annual increase of $3.5 trillion in capital investments from today.
For starters, 5 groups of technologies could attract $2 trillion of capital per year by 2025 and reduce 40% of greenhouse gas emissions by 2050. They include:
- Electrification — electric vehicles, software, batteries, buildings and industries
- Agriculture — farm equipment, meat alternatives, methane inhibitors, manure, bioengineering
- Power grid — storage, controls, software, buildings, nuclear energy
- Hydrogen — production, road & aviation fuel, ammonia & steel production)
- Carbon capture — capture and storage technologies, biochar production, CO2-enriched concrete
With annual investments in electrification ($700 billion-$1 trillion), agriculture ($400 billion-$600 billion), power grid ($200-$250 billion), hydrogen ($100-$150 billion) and carbon capture ($10-$50 billion), we could annually abate approximately 5 gigatons (by electrification), 10 gigatons (by agriculture), 5 gigatons (by power grid), 2.5 gigatons (by hydrogen) and 3 gigatons (by carbon capture).
Research from Ember, a climate and energy think tank, indicates that we’re making strides in the right direction. From 2020 to 2021, demand for electricity grew at record pace (equivalent to adding a new India to the world’s electricity demand), with wind and solar generating 10% of global electricity for the first time in 2021.
In total, solar, wind and other clean sources generated 38% of the world’s electricity in 2021.
Though this is a positive improvement, we still have a long way to go. According to the International Energy Agency, global carbon dioxide emissions from energy combustion and industrial processes rebounded in 2021 to reach their highest ever annual level of 36.3 gigatons, noting a 6% increase from 2020. Overall, greenhouse gas emissions reached 40.8 gigatons of carbon dioxide equivalent in 2021 when using a 100-year global warming potential time horizon.
As the world transitions to clean energy, controversy around green sources also rises. Given the fact that a lot of precious metals or raw materials have to be mined, there are concerns of more carbon emissions in these industrial processes. With global insurance firms like Suncorp ending coverage and finance for oil and gas industries, more pressure has been placed not only on the soon-to-be commodity super powers that produce green metals (aluminium, cobalt, copper, lithium, nickel and silver), but also financial institutions to provide more innovative financial instruments to accelerate the green transition.
These are some of the new commodity superpowers as stated by The Economist:
“Chile is home to 42% of the world’s lithium reserves and a quarter of its copper deposits. Congo has 46% of global cobalt reserves (produces 70% of the world’s output today). China is home to aluminium, copper and lithium. Indonesia sits on mountains of the world’s nickel, and Peru holds a quarter of the world’s silver.”
Since additional innovative financial instruments are yet to be introduced especially in less climate-resilient countries, capital markets have been at the forefront of mobilising capital through green bonds. The global green bond market is currently valued at $433.30 billion as of 2021. Since 2008, the World Bank has issued approximately $17 billion equivalent in green bonds through over 200 bonds with a triple A credit rating in 24 currencies to invest in climate solutions.
Green bonds are bonds used to finance projects that have a positive environmental impact. They include blue bonds, which finance projects focusing on improving the ocean and related ecosystems.
The wildlife bond by the World Bank — the first of its kind — aims at conserving rhinos, whose population has dwindled to 2600 in 2022. Bondholders will be rewarded if the population of the animals grows. Such innovative solutions are needed for various industries and we need to adapt to new ways of doing things.
The authors of “Scientists’ Warning on Affluence”, a 2020 Nature Communications journal article, noted that “any transition towards sustainability can only be effective if far-reaching lifestyle changes complement technological advancements.” Though the top 1% globally emit about 70 times as much carbon as the bottom 50%, each one of us has a role to play to halve global emissions by 2030 and achieve carbon neutrality by 2050 at the latest. The world will be all the better for it.
Alex Kalanda is a business consultant who seeks to use entrepreneurship, innovation and technology to solve the challenges of small and medium-sized businesses in Africa. He founded Ayambe Talent Solutions, a startup based in Rwanda and Nigeria with a mission of creating 1 billion work opportunities in Africa by 2050. His venture was 1 of the 42 chosen globally (1 of 3 in Africa) to participate in the Israel Masschallenge accelerator in the 2021 cohort.
Given his interests in the environment, his team is also working on tools to accelerate carbon neutrality in less climate-resilient countries.
Alex will share more on the importance of carbon neutrality and the concrete steps organisations can take to reduce their carbon footprint in his Masterclass for The Room on 14th April, 2022.