Extreme weather events appear more frequent and more widely reported but no less shocking. July saw record high temperatures in Spain, Portugal, and the UK. Meanwhile it was abnormally dry over large parts of North America and Central Asia. There were extensive wildfires in France and the lowest Antarctic Sea ice readings ever for the month of July.
Over long periods extreme weather events become more likely as the concentration of CO2 in the atmosphere increases. Higher CO2 comes from a range of activities including cars running on petrol, power stations burning coal, deforestation, aeroplanes, and agriculture.
The easy answer to stop things getting worse is to simply stop all those activities, now.
Sadly, it’s not nearly that simple. Huge structural changes for businesses, infrastructure and the global economy cannot happen in one ‘transaction’ overnight, they need to be managed progressively as a ‘transition’ over time.
We can look to an unlikely source - Sri Lanka – as an illustration of how forcing policy implementation in the wrong timeframe can be economically and socially destructive.
Sri Lanka is in a financial crisis with huge external debt, a currency crash and high inflation. It has had a bumpy ride for over a decade needing International Monetary Fund (IMF) bailouts in 2009 and 2016. More recently, government decisions to control appointment of judges, and huge tax cuts, brought neither stability nor prosperity.
On top of this Sri Lanka’s government demanded a total shift to organic farming over a short timeframe and with no support for farmers. The government accelerated this policy in May last year with an unexpected and immediate ban on importing chemical fertiliser and pesticide chemicals.
Production of tea, rubber and other commodities plummeted, meaning lower export earnings. Although the ban was stepped back 6 months later, it had already irreversibly contributed to the financial crisis.
Significant structural moves like shifting an economy entirely to organic farming cannot be implemented overnight by government regulation. Businesses simply cannot pivot fast enough, and cannot be expected to have the resource and skills for making such sudden leaps.
In Sri Lanka livelihoods, businesses and ultimately worker’s standards of living suffered along with the overall economy.
As much as burning oil, gas and coal contribute to climate change, we currently need these for our modern civilisation to function. It’s not just cars and trucks, it’s also about the production of cement, steel and plastics. We need to move to alternatives.
Transitioning a business, our economy or the world economy to net zero carbon takes time. It needs a stepped plan balancing the significant costs of transition with the very significant risks of not transitioning.
New Zealand, along with many other countries, has set a net zero emissions target of 2050. This is 28 years away, we simply can’t wait 28 years for action.
Our listed companies need to be ambitious. Many have already set earlier targets - Goodman Property is carbon neutral now, Auckland Airport has a 2030 target.
However, many of our listed companies have set a 2050 target or, like Mainfreight, are measuring emissions but haven’t yet set a commitment. A company could have four changes in its chief executive before 2050, a mid-century target feels a lot like kicking the problem down the road.
There’s no need to do an overnight Sri Lankan-style switch, but a well-planned and more aggressive approach than 2050 is needed. The message for business is simple - move net-zero targets forward and set interim steps to get there. Be ambitious.