Why the current crisis is an opportunity to build a green economy

The world is going through multiple crises, but each crisis can also contain an opportunity. The key to identifying those opportunities is to look at different time frames. Can we find ways to take advantage of the urgent crises we face today and transform them into opportunities to address longer-term challenges?

The just-published Global Risk Report 2023 helps answer this question, posing risks in three time frames: through a survey of experts to find out what, in their opinion, are the biggest risks facing the world this year, in the next two years and in the next ten years.

This year, the biggest risk is the energy crisis, followed by the cost of living, inflation and food supply. In view of the next ten years, the main risks are very different. Climate change mitigation tops the list, closely followed by climate change adaptation and two other closely related risks: extreme weather events and biodiversity.

There is a clear relationship between the risks that are considered larger in both categories: the current energy crisis has caused a short-term setback in our efforts to mitigate climate change in the long term.

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from green to red

At the outset of the COVID-19 pandemic, it briefly appeared that the energy transition was on track to accelerate. As global lockdowns led to lower demand for fossil fuels, we seemed to glimpse our net zero future. But when the immunization of populations reduced the need for lockdowns, global carbon emissions skyrocketed again, despite recent advances in the deployment of renewable energy technologies and electric vehicles.

Last year, the war in Ukraine further derailed the zero emissions ambitions of many countries, which rushed to seek alternatives to importing Russian gas, and many economies expanded the use of fossil fuels, revealing that progress in reducing demand for fossil fuels has been too slow.

Often the most available alternatives have been fossil fuels, despite advances in renewable energy. The EU, for example, is on track to spend more than €50 billion this winter on infrastructure and fossil fuel supplies. Demand for coal is projected to reach its all-time high in 2022, dashing hopes that the previous high, reached in 2013, would not be repeated.

Zurich Insurance Group’s Climate Mitigation Scorecard shows how far progress on climate mitigation has stalled. It tracks 12 indicators that influence mitigation, classifying them in annual assessments as red, yellow, or green. Whereas in 2021, four of the 12 indicators were green and only one red, in 2022 the opposite was the case. Three indicators – fossil fuel subsidies, carbon dioxide emissions, and energy demand and efficiency – went from green to red in a single year.

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Shocks, not stability

It seems likely that the power supply disruption will continue. Respondents to the Global Risks Report 2023 rank the geoeconomic confrontation among the top three risks for the next two years and more than half expect the next ten years to be marked by persistent crises or multiple shocks, rather than a return to normality. relative stability. The attack on the Nord Stream 2 gas pipeline, together with Russia’s repeated attacks on Ukraine’s energy grid, threatens to normalize the destruction of energy infrastructure as part of conflicts.

However, the energy crisis we are facing in the short term represents an opportunity to give a new impetus to the energy transition that we need in the long term. Although burning more coal is often the cheapest and easiest answer, other technologies – from renewables to nuclear to hydrogen – can help both the transition to net zero energy and the energy security of countries.

High energy prices may also force renewed attention to energy efficiency. However, the level of confidence in the effectiveness of price signals is frustratingly low in current politics. Although it is clear that adaptation will be painful, the end of the era of cheap carbon energy is inevitable.

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From crisis to opportunity

We need leaders who make clear to the public the connection between mitigating climate change and building resilience in the face of geopolitical instability. Although the difficult macroeconomic situation makes it difficult to increase the investment needed to promote clean energy projects, the current crisis presents an opportunity that should not be missed.

And this is not the only possibility of taking advantage of short-term crises to speed up long-term reforms. Two of the top four risks by 2023, food and energy systems, are closely interconnected with the top four risks 10 years from now (climate change mitigation, adaptation, extreme weather events, and biodiversity) in multiple complex and complex ways. overlapping.

Often, attempts to balance priorities involve difficult trade-offs. For example, increasing food security and conserving biodiversity can be in conflict: the positive and negative aspects of alternative land use options need to be balanced constructively.

However, some nature-based climate solutions offer multiple advantages: interventions such as mangrove and natural forest restoration can contribute to climate change mitigation by not only maintaining natural carbon sinks, but also by adapting to extreme climate risks, such as storm flooding, while providing nutrition and employment options to local communities.

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two steps forward

The Global Risks Report 2023 shows that we need to support climate change adaptation measures now. No one said it was going to be easy, but the long-term cost of not adapting is monumental compared to the temporary pain of pursuing short-term adaptation. We cannot afford to sleepwalk into the climate crisis. That is why Zurich calls for collaboration to develop better indicators for the voluntary carbon market.

Often in life we ​​need to take one step back in order to take two forwards. Sometimes, as in the case of the current energy crisis, a step back is forced, but it still presents an opportunity to move forward.

As we enter 2023, we must not stop taking those steps forward.

Source World Economic Forum.

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