The climate paradox: can we resolve it?

With the Covid-19 pandemic largely in governments’ rear-view mirror, the contradictory nature of national efforts to address the climate crisis has come back into focus. In the United States, President Biden passed the Inflation Reduction Act, providing extensive tax incentives to companies and consumers to develop and buy environmental products. Then, just a few months later, he approved a massive $8 billion plan to extract 600 million barrels of oil from federal land in Alaska. Similarly, at the 20th Party Congress in China, President Xi reaffirmed China’s “dual carbon announcement” to peak emissions by 2030 and reach carbon neutrality by 2060. But he also elevated the concept of “xianli houpo” (i.e. establish the new before breaking the old) and continued investment in fossil fuel development and accelerated approval of coal power plants to the highest level since 2015.

In the European Union (EU), the Russian invasion of Ukraine disrupted long-held assumptions about energy security in many EU states and natural gas imports from Russia declined significantly in 2022. Yet EU members mostly replaced those with imports of liquified natural gas (LNG) from the United States with the rapid proliferation of LNG import facilities over the past year. It remains to be seen whether renewable energy deployment will expand significantly in this new, post-invasion EU energy framework or if we are simply witnessing the creation of a new, fossil-fuel centric model. India aims to increase “non-fossil” electricity — solar, wind, nuclear and hydropower — to half of the country’s electricity capacity by 2030. Yet India’s growth remains carbon intensive with electricity and transport still largely powered by fossil fuels and national emissions expected to rise significantly by 2030.

These four blocks of countries — collectively accounting for more than half of global greenhouse gas (GHG) emissions — illustrate the persistent contradictions in policymaking in the green economy. As the global economy barrels towards breaching the 1.5 degrees Celsius carbon budget as soon as 2030 — a dangerous climate threshold - these contradictions must be resolved, and fast.

The climate paradox

Paradox — when outcomes contradict reasonable expectations — has been observed in various parts of the green transition for years. The “green paradox” refers to an outcome where climate policies like carbon taxes fail to reduce emissions because they compel fossil fuel producers to accelerate short-term resource extraction fearing higher taxes in the future. The green paradox in financial markets describes the risk that moving too rapidly to address climate change could materially damage financial stability as asset prices collapse in response to the sudden expansion of climate-related regulations.

In 2023, the global community is stuck in a broader climate paradox. Political rhetoric, growth and affordability in renewable energy, and innovations in clean transportation and buildings have placed the climate crisis and sustainable development at the center of the public and economic agenda. Yet, at the same time, topline indicators linked to global GHG emissions, environmental degradation, and social inequality continue to worsen. Our collective awareness of this largest of collective action dilemmas is rapidly building, yet it isn’t making a large enough dent in the outcomes that matter.

Rhetorically at least, political leadership has focused primarily on the climate crisis since the 2015 Paris Climate Agreement, where 195 parties came together and committed to limit global warming to 1.5 degrees Celsius above pre-industrial levels. In the intervening years, data tracking of these commitments has become increasingly sophisticated, with organizations like Climate Action Tracker modeling if existing country-level policies in place are in fact compatible with this 1.5 degrees Celsius pledge. In early 2023, more than seven years after the Paris Climate Agreement, not one country had policies aligned with this global aspiration.

In terms of renewable energy, a slightly different version of the climate paradox emerges. The 2010s witnessed a dramatic reduction in the cost of renewable energy, and today the price of solar has declined by approximately 80% since 2010. Renewable energy today is cost competitive or cheaper than fossil fuels, and this market reality is driving a significant increase in new installed capacity. Yet the contribution of these renewable sources to global total energy production — which includes electricity generation, transport, and heating — remains stubbornly low. Today, the share of fossil fuels in global energy consumption is basically unchanged over the past decade, despite notable growth in large economies like the US, China, EU and India.

​​Infrastructure — particularly buildings and transportation — offers more evidence of the climate paradox. Throughout the 2010s, Leadership in Energy and Environmental Design (LEED) in the United States and Building Research Establishment Environmental Assessment Methodology (BREEAM) in Europe offered building standards to embed sustainable design principles and reduce emissions in the buildings sector. Electric vehicles (EVs) offered similar possibilities. Yet, data from the latest Global Green Economy Index shows that the emissions intensity in both the buildings and transport sectors has only declined by about 40% in the United States over the past two decades, an insufficient improvement to keep the 1.5 degrees Celsius target in sight. Furthermore, supply chains for both buildings and electric vehicles continue to exert new resource strain, most notably mining for lithium, nickel and cobalt to support explosive growth in EV battery technologies.

Can we resolve it?

The window is rapidly closing to limit warming to the 1.5 degrees Celsius threshold so often referenced in climate negotiations, media, and net zero targets. My organization has conducted expert surveys since 2020 asking policymakers, investors, development practitioners, and members of environmental non-profit organizations (NGOs) for their candid opinions on how to resolve this climate paradox. This surveying generated over 3,000 responses and included follow-up interviews with select respondents to better understand their feedback, with a focus on contacts in the Global South. The results revealed both frustration at the stubborn contradictions around green policymaking, but also new approaches to resolve them.

Widespread disillusionment with the UNFCCC Conference of Parties (COP) process as a mechanism for realizing emission reductions is prevalent. Respondents recommended separating out the world’s largest emitters (i.e. China, US, EU, India) for parallel negotiations around mitigation (emission reductions). To many respondents, particularly from the Global South, the real climate paradox is how much time is spent negotiating emission reductions among a small handful of countries, at the expense of addressing the already severe impacts of climate change in the developing world. By forming a parallel, separate track for the few countries mostly responsible for global emissions, the annual COP could be more focused on delivering financial support for climate adaptation in the developing world. The breakthrough in late 2022 at COP27 around loss and damage could be a starting point for this shift.

Others suggested introducing a compliance mechanism to the COP process modeled on the World Trade Organization (WTO) Dispute Settlement Body. Established in 1994, this body reviews trade disputes and has a strong track record of settling them. The Dispute Settlement Body (and likely any similar entity established through the COP framework) lacks the mandate to take formal enforcement actions against countries. But it could raise awareness around broken promises related to climate pledges. As a simple first step, survey respondents suggested posting data linked to the country's progress towards emission reduction targets to promote transparency and raise the intensity of peer pressure among governments. 

Respondents also highlighted trade as an approach to resolving the climate paradox around renewable energy. Prospects for a global price on carbon remain out of reach, particularly in the United States where both the right and left wings of each political party find reasons to dislike it. Yet a “Green Free Trade Agreement” liberalizing trade in green products and services as well as in investments to support them, deserves consideration according to the survey. However, existing or new government support for green tech continues to compete with stubbornly persistent fossil fuel subsidies, which exceeded $1 trillion in 2022, according to the International Energy Agency. Frustration with this contradiction featured prominently in the survey results, with a clear majority of respondents advocating phasing out these fossil fuel subsidies.

Survey respondents indicated that progress in the transport and buildings sectors could come from reimagining how to better target policies to promote broader technological “tipping points.” A recent study by SystemIQ and the University of Exeter “The Breakthrough Effect'' analyzed what this might look like in practice. The study concluded that EVs are already at or near a tipping point, with possible consequences for sectors like renewable energy. By implementing zero-emission vehicle mandates and building out charging infrastructure, similar tipping points could be accelerated in renewable energy coupled with battery storage in the power sector. For buildings, mapping the built environment by areas with the highest carbon footprint and then targeting policies accordingly to reduce emissions could realize faster overall progress than a blanket approach. 

Climate realism

The global economy is careening towards exhausting the 1.5 degrees Celsius carbon budget and the latest report from the International Panel on Climate Change (IPCC) warns of catastrophic warming as we approach this dangerous climate threshold. Shifting gears from climate paradox to climate realism should be a priority this decade. By further examining why we keep getting so stuck in the climate paradox, we might break the current impasse.

The reasonable reaction to the rapidly diminishing carbon budget this decade is not to simply change the target, shifting the public debate from achieving a target of 1.5 degrees to a target of 2 degrees Celsius. Such a move risks further eroding public trust in global and national institutions, and signaling that the climate crisis is not a top priority. It also cynically overlooks billions of people in the developing world whose lives and livelihoods would confront dramatically greater disruption in a 2 degrees Celsius warming world.

Instead, we need to finally get real about resolving the climate paradox and the contradictory policy and investment decisions fueling it. This does not require a wholesale reinvention of the institutions, policies and technologies already percolating in the global green economy. But it does demand a much more honest examination of how they can be tailored to accelerate progress. This involves integrating new thinking and learning from efforts over the past decade including the COP process, approaches to sector decarbonization, and the growth of renewable energy. Otherwise, we risk simply languishing in today’s climate paradox during this most critical decade of urgent climate action.

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