Dialogues: #5, #6 & #18
Young-Jin is Director of Impact & ESG at Vidia Equity, where he builds on his experience as Head of Research, Impact Investing, at Phineo gAG. Prior to Phineo, he worked for Monitor Group (now Monitor Deloitte) as a senior strategy consultant and before that as an investment manager in 3M's corporate venture capital team. He holds degrees in mechanical engineering, management and PPE (philosophy, politics, economics). Young-Jin joins us from Germany (Munich), where he is based.
In spite of massive fossil fuel misinformation and predatory delay, and a persistent market and regulatory failure that grants the fossil-fuel industry obscene and unsustainable short-term profits at the peril of humanity’s future and life on Earth, recent technology advances have finally begun to promote the transformation of our civilization’s fossil fuel-based energy system. Now the crucial question is how this transition can be dramatically accelerated. Young-Jin Choi argues that strategic modifications of the current economic and financial system design, including focused regulatory measures, standards, incentives, and additional public investments, enabled by a functional democracy, are the key to accelerating the transition towards a negative carbon economy.
It is the early 2020ies and humankind finds itself in the midst of multiple social, economic, political, geopolitical and environmental crises across near-term and long-term horizons. It sadly has become apparent by now that in their current shape and form, human societies – in particular their social (legal, economic, financial, political, educational) systems and institutional foundations – are not well designed to effectively respond to this perilous situation. While there are near-term risks, including a war in Europe, an economic and energy crisis, inflation, and catastrophic weather events that must be managed in a fair and sustainable manner, we also must not lose sight of the big picture, the greatest challenge of our time. Overlapping with the near-term crises are two constantly increasing mutually reinforcing threats of an escalating hot house earth dynamic (triggered by uncontrolled fossil fuel production/consumption and cascading climate tipping points) on the one hand, and the threat of nuclear conflict multiplied by planetary heating (alongside increasingly scarce resources, rising sea levels, mass migration, access to fresh water, arable land, etc) on the other.
Judging by the current state of public discourse and the poor quality of political and economic leadership at display, there appears to be a huge unmet need for a deeper contextual and scientific understanding of today’s generations’ historic responsibility, combined with a lack of awareness about the drivers and root causes behind our inability to adequately manage the climate-nuclear crisis thus far, which includes market and regulatory failure, misinformation, out-of-control lobbyism and ultranationalism. In particular, there is a need to understand that the rapid and drastic GHG emissions reductions at the pace and scale needed to succeed cannot be expected to come from voluntary pledges, NetZero commitments, ESG practices, improved transparency, or better data quality. Voluntarism and better transparency might have worked a few decades ago, but as our time as a species is running out, mandatory measures to enforce real-world decarbonization pathways has become a critical success factor. This doesn’t imply a need for a planned economy, rather a need to make full use of the combined accelerating forces of market incentives, technological progress, and mandatory rules and laws.
For the past decades, climate regulation and green (public) spending have been kept far below their potential, largely because the voice of scientific reason calling for rapid decarbonization (#racetozero) has been too weak relative to the forces resisting change. Clearly, we are seeing Kurt Lewin‘s „force field“ theory of change at work here, with the fossil fuel industry and radically nationalist social agents having spent enormous resources to sabotage, water down and delay meaningful climate action. Given that we are already far too late, and the window of opportunity is closing, we must urgently expand the Overton window, move beyond voluntarism, and push as hard as possible for nothing less but a determined “emergency turnaround” at a global scale. A great transformation is needed in two ways:
While the headwinds may appear overwhelming, there are also hopeful, favourable tailwinds to build upon: Only recently, technological and economic improvements of renewable electricity and electrification have begun to materialize, which has fundamentally shifted the competitive landscape. In addition to technological tipping points, there are social tipping points that might positively surprise us, if they can be activated in the near-term. Even though the decarbonization pathway of a 1.5 C scenario may appear increasingly difficult to achieve under the current frameworks and conditions of market and regulatory failure, we can still come rather close, if we collectively really wanted to. To this end, I believe that an “all at once” approach, including the following four measures, is mission-critical:
The aforementioned measures have a mutually reinforcing effect. For example, measures 1-3 are contributing to strengthen the case for measure 4, while measures 2,3 and 4 contribute to increased climate finance allocations. I believe that our private, professional, political and philanthropic engagements for the years to come should be guided by the goal of getting these measures in place in a timely manner, as soon as humanly possible. This could get us a long way towards a broader vision of an “impact economy”, i.e. an ethical and sustainable economic system that disincentivizes and restricts (currently legal) business activities that are causing severe harm, and that supports and enables sustainable, regenerative business activities that create real societal value, including those that happen to be less profitable under conditions of market failure.