(The author is managing director of Cambridge Econometrics’ Budapest office. Ekonomi is a G7 opinion column.)
This month, it will be three years since the local law came into force Climate Protection Actwhich set Hungary’s ambitious goal of achieving complete climate neutrality by 2050. In other words, the country does not emit more greenhouse gases than it can absorb.
By setting the lofty goal, our country has joined the narrow club of elites, however, the concrete steps needed to achieve the goal are yet to appear on a daily basis, and the question of what exactly the country can achieve by the rapidly approaching deadlines of 2030 and 2050 is a growing question.
What causes this discrepancy between ambitious goals and current inaction? We can’t wait that longIndeed, according to some opinions, we are already too late to avoid climate change.
Responsibility for lack of steps can be sought in state, regulatory, corporate, and consumer circles alike, and their common denominator seems to be that ultimately it is determined by individual decisions and individual involvement, who takes what and how seriously. However, individual decisions and the sense of involvement of individuals are influenced by many misunderstandings, misinterpretations, and myths, which seem to be very effective in preventing real changes from starting to achieve intended climate neutrality.
Let’s take a look at what these myths are and why they can lead you astray if you don’t let them pass too quickly.
One of the most common of these myths is that transitioning to climate neutrality is costly. Of course, the transition, i.e. the transition of the economy, institutions and our daily lives to a sustainable and carbon-neutral process, has costs. However, there are three important factors that cloud the cost picture.
One is that maintaining a polluting current operation involves a lot of investment: we are constantly renovating our power systems, our building stock, and production equipment in order to maintain their functionality, improve efficiency and make necessary improvements. So if we have to spend on it anyway, why not spend on more modern and sustainable technology? Of course, it may (now) be more expensive, but the difference is only what more expensive technology currently means, and the need for investment cannot be entirely attributed to sustainability efforts, because we will also need a part of the investment in addition to traditional technologies. If we look at it this way, the amount of additional investment is actually much smaller.
The second factor is that most of the proposed investments are those that pay off financially in the long term, as thermal insulation of buildings, energy efficiency investments, transmission electricity, and renewable electricity generation are solutions that reduce overhead costs after initial investments, and operation. It also improves the foreign trade balance of oil-importing countries. In addition, while we find seemingly astronomical figures regarding additional costs, the reality is that this investment demand will be about 2 percent of the annual GDP of an average country. (By comparison, this amount is the same amount of military spending currently expected from NATO member states, and although not all countries spend that much on the defense sector, none of the member states have fallen into it yet.)
The third factor that overshadows the issue of transition cost is the cost of not moving, i.e. inaction. Of course, while the costs of moving happen today, the costs of not moving will only come later, but they are significant. Current computational models show that between 2030 and 2040 there will be tipping points that will lead to irreversible changes in our environment and the climate of the planet. The cost of adapting to it is immeasurable, and its cost is utterly unimaginable, due to changes to which humanity will not be able to adapt, at least in some areas of the Earth.
Based on the literature estimating the negative effects of rising temperatures on the economy, the so-called chronic physical hazards, that is, the decline in productivity caused by a higher average temperature (for example, lower agricultural yields, increased difficulties of working outdoors), may even eliminate to two-thirds of GDP by the end of the century, if we passively follow the 4°C warming trajectory. (This estimate does not yet include damages and costs from natural disasters.)
The second most common myth concerns the role and potential of the state. Among the many potential actors, states and governments stand out as the most important actors in regulation, financing, and innovation. According to many opinions, we can be optimistic about our chances of facing climate change because there will be many new solutions and technologies in the near future that we do not know about today, and we can achieve great changes by using them.
However, this optimistic technological approach presupposes a level of research and development, the scale of which cannot be expected from any country or government agency alone, and can only be achieved through the significant contribution of the private sector and the combined use of the public and private sectors. own resources.
Currently, the member states of the European Union spend an average of 2-3 percent of their annual GDP on research and development, which is not a very large percentage compared to the importance of the problem and should certainly be increased. So, in Hungary, don’t wait for roast pigeons, in companies and the private sector, R&D will be necessary to change at least as much as we expect public spending on R&D.
Thirdly, it is necessary to abandon the myth – or rather, the habit – of short-term planning as soon as possible, so that our actions today really serve the long-term future. Actors in economic life – and within this area of finance in particular – usually think of planning periods extending from one to five years. This is about climate change and achieving climate neutrality It’s a big mistakebecause the most brutal changes await us lies beyond this horizon for several years. Thus, those who do not lift their heads out of the sand support investments with their investment decisions today that, on the one hand, do not serve to offer new and sustainable solutions quickly enough, and on the other hand, do not take into account the inevitable changes that affect them as well.
According to the following myth that must be destroyed, the impact of individual decisions is too small to achieve a significant change in climate neutrality, and therefore the responsibility of individuals in combating climate change is limited. In contrast, there are many more Show search, that people’s individual lifestyle changes can contribute significantly to reducing greenhouse gas emissions. Especially if they happen on a large scale and reach critical mass, assuming that Change will be constant and “fashionable”. These priority areas are usually transport (mobility), food consumption and housing.
Of course, individuals can be in a decision-making position if the systems around them allow it – sustainable solutions, products and services appear in Hungarian and become optional, or if the interest of society can be placed over private interests, which requires education.
The extent of immediate, local and individual action is greatly diminished by the myth that narrows the problem to one of reducing emissions. From an environmental point of view, climate change is much more than a carbon dioxide, greenhouse gas, or global warming problem. Divided into regions, climate change is accompanied by environmental anomalies that greatly affect water management, agriculture, availability of raw materials, productivity, supply chains and transportation – think of increasingly frequent events in our country as well. severe drought and the floods that replace it and storm damage.
Moreover, a change in the environment can in many cases become a synergistic factor for the economy and society. Lack of water not only has a direct negative impact on agriculture or the population, but can also reduce energy supplies, since power plants use cooling water, and recently built battery plants will be important users of water – if any. In addition, the Earth’s carrying capacity is limited and the regional distribution of supply capacity will also change as a result of climate change, and this will become a natural and obvious barrier to economic growth and expansion in the future. This is why adaptation, or what is called climate adaptation, increasingly requires today’s decisions in order to make the future livable, or rather to survive.
But among them all, perhaps the myth that needs to be destroyed more and faster is the myth according to which it is enough to leave things unchanged, and environmental changes can be mitigated by this, the temperature will rise by 2-3 degrees at most. With the changes already affecting us and our environment becoming more powerful and in the coming decades will take on an exponential scale when individual tipping points are reached, this ecological and social myth is simply not true. The later we change, the more unpredictable environmental and social impacts we have to contend with.
By all accounts, the poorest will be the most socially vulnerable in terms of climate change
Their exposure to their habitats is usually greater, their opportunity to learn about the changes that threaten them less, and the capital required for individual or community investments is immeasurably less than in the case of other classes, so the effects on them lead to dramatic social changes (famine, health problems, migration , rebellions).
So the opposite of the above seems to be the best recipe: the earlier we start, the less cost and effort we can achieve, and the greater the impact we can achieve. This requires the emergence of individual and social responsibility and a change in thinking that focuses only on short-term interests – political, economic and social -.
Perhaps a glimmer of hope for this is that the transition to climate neutrality takes place at the same time Very good deal. More and more people are investing in renewable energy, ESG funds, new technologies and other sustainable assets. Based on economic calculations by Cambridge Econometrics, an average return of 12 times has been shown for every dollar spent adapting to future climate change (adaptation) impacts in ten emerging Asian and African countries. If a business based on change is very profitable, it will certainly spread, and if something spreads (for example, a new technology or business model), it will be beneficial for more actors to adopt it.
Those governments, organizations, companies and individuals who work now can gain a competitive edge over those who get up later. Rather than keeping myths alive, this must now be facilitated through predictable regulation and the creation of conditions that encourage change.
The Cambridge Econometrics Conference and the Center for Green Policy’s Climate Neutral Conference on June 1 also discussed these myths and their necessary destruction. Professional speeches and discussions here Those interested can look back.
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