Decarbonization is a megatrend

Andrea Vassallo is a Sustainability Analyst based in Barcelona, and is also the founder of The Climate Tech Business Newsletter, exploring everything at the frontier of Climate Tech across the world

Why is decarbonization so important?

Decarbonization is the new frontier that will drive the creation of the low-carbon economy.

The price of climate altering emissions has already become a burden that many organizations can’t bear anymore. And I’m not talking only in terms of the “nature-cost” of this transaction. Today, high emissions can also imply a high economic cost to big brands and corporations.

Decarbonization is now being pushed forward as the necessary solution to drive cost optimization, build resilient physical infrastructures, and position brands in the market that will become the point of reference for customers for their purchases.

But let’s not forget that this is also about a planetary emergency.

If we want to achieve net-zero emissions by 2050, as highlighted by the International Energy Agency (IEA), we need to reduce our almost 34 gigaton of annual CO2 emissions to zero.

At the time I’m writing this article, many plans and roadmaps have been established. But the question is: will we be able to achieve them?

Today, we are going to start a journey to dive deeper into the topic of decarbonization to explore why it is becoming the megatrend that will revolutionize industries and global markets.

The current scenario

If you are reading this article, you probably already know that we are in a race against time to avoid a global collapse in our natural ecosystem.

Greenhouse Gases, also known as GHGs, are the major factor responsible for turning our atmosphere into a burning dome and drastically influencing the course of natural events that keep our climate stable.

Out of all the GHGs (you can find the complete list here), carbon dioxide (CO2) is the one that has the highest impact due to the enormous amount of its quantity produced.

This is the breakdown of global CO2 emissions at 2020 based on the estimates published by the IEA in the report Net Zero by 2050:

Source: Net Zero by 2050 - IEA

As you can see, the current energy and industry productive systems still rely on generating enormous amounts of GHG emissions for their outputs. This makes them highly inefficient in terms of present and future sustainability.

The major players driving decarbonization forward

Here is a visual map of the key actors in the space of decarbonization:

As you can see, we can identify three types of “sub-worlds” that are currently driving decarbonization forward:

1. Business: the main goal of the business world is de-risking its operations and economic opportunities. The organization acting in this capacity wants to reduce at minimum the threat of the biggest climate catastrophe that humans have witnessed in their long-time history.

Why? Because climate change is making running business operations more expensive, starting from insurance costs for owned assets to sourcing from global supply chains.

Corporations have to deal with the worst impacts from climate change due to the usual scale of their operations, their lack of climate risk management, and the limited control they can have on the unpredictability of climate disasters.

On the contrary, startups represent part of the solution thanks to their leaner approach to complex problems and the ability in building innovative products or solutions that can also help corporations in minimizing those risks.

Investors here play a key role: they can enable and facilitate the development at scale of those solutions.

2. Policy: the main goal of the policy world is regulating how decarbonization is managed.

Institutions have not only the objective of setting emissions reduction goals, but also the task of explaining to businesses how and by when they have to do so.

Institutions are made to turn chaos into order, and that’s exactly what they need to do to coordinate our efforts against climate change. Institutions can be supported by think tanks, which usually provide in-depth research or data analysis on specific topics, in the practice of creating sound and bearable regulatory constraints.

Interest groups gravitate around institutions with one single purpose: to establish influence. Whether this influence is bad or good depends on what kind of interests those groups are promoting. To make it simpler: they are the lobbyists.

3. Civil society: the main goal of the policy world is ensuring transparency and inclusivity in the process of making the decisions that will determine the fate of our civilization.

Civil society can influence the process through standards setters, organizations that develop standards to be used, for example, in business disclosures through consultations with various stakeholders.

In this process, advocacy groups, which act similarly to interest groups but towards citizens, can influence public opinion around key issues and leverage it to influence the decision-making process in which ordinary people have high stakes.

Lastly, independent researchers can play a pivotal role in shaping the debate and the quality of information around decarbonization as a global process.

These three “sub-worlds” collide quite often in the collective effort of defeating the chimera of climate change, but with not always great results. Each of them has its own needs and interests in this challenge, and they might not always align with each other.

However, playing a cooperative game is the only strategy that will lead us eventually to victory.

The frontiers of decarbonization

Decarbonization has officially become a “megatrend.” Those who don’t follow are incurring the serious risk of being excluded in the low-carbon economy that is emerging thanks to a greater awareness about the menace of the dawn of mankind.

A low-carbon economy is opening many new frontiers that are being explored and that will generate new abundance to fuel the future of human progress.

This change is currently happening through a cascade effect in a both vertical dimension (i.e., a change that impacts a specific sector) and cross-sectorial dimension (i.e., changes in one sector indirectly “contaminate” another one due to the close connections between each other):

The changes happening are already manifesting themselves in business practices and emerging regulations and gradually expanding to entire global communities of professionals and practitioners.

It’s just a matter of time before they’ll become a consolidated reality.

Then, how should we approach this change? We have to become the scouts of the future, exploring the frontiers where we can build the foundations of the future we want to see happening.