The Clean Industrial Revolution: A new (Powerfully) Ally to Tackle the Climate Crisis

COP27 enters in its second and final week and some of key elements of the big Climate Summit taking place in Africa are getting more defined.

A key feature is that the global energy crisis is cannibalising most of the attention and it is leading the debate among the thousands of delegates that are gathering beside the Red Sea. The long and deep shock wave of the global energy crisis deeply affects the discussion across two main dimensions.

The first dimension is the economic context: while western world experiences inflation at levels not seen since 50 years, many emerging countries are affected by prices of key fundamental goods – such as food - that are rising 3-4 times faster than what happening in developed world. In such context, the preoccupations and complaints of rich countries are poorly understood – to say the least – from those areas of the world that are fighting to survive and not just experiencing a simple deterioration of own purchasing power.??

The second dimension is geopolitical: with the world in turmoil, the emerging countries are more and more the first victim of the consequences of a conflict that they did not create and that they are not involved in. Linked to lower level of confidence in the promises made by advanced economies since long time, it is evident that dialogue is characterised by some scepticism. In other words, the voice of emerging countries, starting from Africa ones, is getting louder and clearer at COP27 while also getting harsher towards that part of the world that is supposed to lead by example and taking more responsibility.

Another big element erupting at COP27 is the concerns for national security that has become a fundamental element driving the thinking and decisions of leaders. The national security is something that many countries are testing every day since 24 February, date of Russia invasion of Ukraine. But, especially in developed world, that has been enjoying abundant energy availability since many decades, the concept is almost new, once associated to energy. The advanced economies had never experienced in the modern age a risk of energy shortage as big as today. This has made clear to many the astonishing importance of having a safe, secure, reliable and affordable energy system to ensure the economic and social stability of own society. As such, the “energy dimension” has become an even more important aspect of national security.

What in my view is definitely dominating the debate and decisions of Egypt’s UN Climate Summit is the emergence of a truly global competition for the industry and manufacturing of the future. Following decades of progress and technology innovation, the world is now on the verge of a massive industrial revolution based on new cleaner technologies that are going to reshuffle the industrial (and economic) system as we know it.

The latest ‘trigger’ has been the US Inflation Reduction Act, a multi-hundreds billions of dollars plan translated into a Law that has the concrete potential to spur a gigantic wave of investment and re-define the industrial leadership of the future. Almost three months from its announcement, many countries are realising the huge implications of such law in terms of investment, manufacturing of clean technologies and related jobs and employment consequences.

If the US Act would be even alone a massive step forward, it is also generating a spill over effect and “emulation” process from many other key regions of the world: Japan has already introduced the GX green transformation plan, Europe adopted Repower EU but it is also considering to boost it further and to adopt emergency measures to speed up renewables deployment. Canada, just recently announced tax credits for investment in clean technologies and renewables as a way to boost domestic manufacturing.

Here the competition is not only within advanced economies but - also and mainly - with China that – slowly but surely – has emerged as a global leader in several clean technologies: from solar pv panels to electric cars; from nuclear power technologies to wind turbines. And last but not least, its predominance in the basis of the industry of tomorrow: the processing and refining of all those critical minerals that are the backbone of the majority of clean technologies.

The alignment of climate goals, national security concerns and industry leadership is a very powerful combination. The business sector is reacting very rapidly to such unique situation. While the presence of the business community at COP27 did not seem to me being as large and enthusiastic as seen one year ago in Glasgow, numbers speak for industry. Renewables deployment is accelerating at a pace never seen before; sales of cleaner tech like electric vehicles and heat pumps are at record levels; and initiatives in the hard to abate sectors – including steel, aluminum, and cement; near-zero carbon aviation fuels and zero-emission trucking and shipping – are flourishing.

All these elements are very instrumental to bring concrete results in the climate domain. Probably, the climate movement find today one of the most powerful ally in the big industrial rationale for transforming the energy and economic system in a sustainable way. The key driver of investment from the private sector has shifted towards security and industry leadership reasons. This makes the climate driver less compelling than before – and perhaps as such might affect Climate Summits – but again – that does not make a huge difference if the “new old drivers” will be helpful to make the world going to that decarbonisation process that desperately needs.

The rise of new drivers bring new challenges to the table and does not cancel old issues.

The new challenges are related to develop secure and stable supply chains for all those technologies that hopefully will move from being niches to mainstream. The topic of critical minerals, their sustainable production, refining and processing is emerging very strongly and is set to create new alliances, new trade flows and new partnerships. A failure in the supply chain might have massive implications in terms of slowing down or even preventing the clean energy transitions.

The old issue remains on the table – as important as ever. The financial support promised by advanced economies to emerging one is still an unfinished business. In a world deeply divided and in turmoil, this situation can easily widening the gap between rich and poor and compromise mutual confidence and trust. It is not “only” a matter of climate justice and reduction of emissions where it is cheaper and makes more sense. Now, it is also reducing opportunities for the developing world to join the next chapter of industrial development that is emerging.

?With COP27 taking place in Africa, where unfairness and injustice are too often a prevailing element, fulfil such old promise would be not only symbolic, but particularly important.?