Symbiotic Relationships: US & EU Climate Markets & Cleantech

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The 2022 US climate bill — more generally known as the Inflation Reduction Act — prompted European diplomats to growl and frown this past week at the World Economic Forum in Davos. That’s because geopolitics may never be the same again after the IRA’s passage, as actions to reduce climate pollution have been made law and the money to fund it has been guaranteed through subsidies. The IRA is opening up previously-unheard of global cleantech competition. Climate markets are responding in kind.

As the Forum concluded, European lawmakers remained concerned that their own cleantech growth investments may suffer as the US begins to release grant funding. Take for example the recent approximately $100 million for projects that advance environmental justice in underserved and overburdened communities across the country. Community groups can use it for a variety of things, whether it’s monitoring air pollution or training people to tap into bigger grants.

In response, leaders of France and Germany and EU officials have called for Europe-wide and country-specific industrial bills aimed at matching the incentives being dangled by the US, in what Bloomberg Lawterms the “cleantech arms race.”

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The defining challenge of the 21st century will be climate change. How will climate geopolitics — those politics, especially international relations, as influenced by geographical factors — rise up to tackle the problem?

Wasn’t it only a few months ago in which Europe was significantly ahead of the US in environmental action and regulation? Not anymore. “To keep European industry attractive, there is a need to be competitive with offers and incentives,” Ursula von der Leyen, the EU Commission president, said in a speech at Davos. “We must also step up EU funding.”

Then again, even siblings quibble. “Having a competition to drive things faster, and bigger scale is not a bad thing,” Jennifer Morgan, Germany’s climate envoy, said in an interview at Davos this week. “It’s kind of like: Game On.” The stars are aligned for a US and European collaboration, a gestalt that will generate better outcomes for both climate markets. Climate solutions are now an opportunity, rather than a risk, so increased investment in a green future seems very appealing.

Cleantech & the Climate Markets Coalesce

The COP27 climate summit in Sharm el-Sheikh foreshadowed strategies now unfolding in 2023 climate markets.

• Keep fossil fuels in the ground and, instead, look to more investments in renewable energy. Think wind, solar, and hydro power. Smart cities and electrical grids. Sustainable infrastructure. Regenerative agriculture. Mapping wetlands. Consumer applications like smart appliances and thermostats.
• Curb methane emissions. Around 60% of methane emissions originate from anthropogenic sources including landfills, livestock raising, the oil and gas industry — so make these industries and habits transparent. Call out Big Oil greenwashing. Demand methane monitoring services. Aerial sensors combined with cloud-based analytics can find methane leaks on a continental scale.

• Electrify everything.EVs, for certain. But also all kitchen appliances. Heat pumps are appreciating climate assets. Electric lawn devices and ebikes. These are the areas over which we have the most control: our vehicles and our homes. But also demand that the feds pursue government-wide electrification campaigns to meet robust emissions goals.
• Plant more trees, reduce deforestation. We’re actually further from stopping deforestation now than we were six years ago. Each year, the world loses about 10 million hectares (24.7 million acres) of forest area. Major companies with supply chains at risk of causing deforestation don’t report their activities to stop deforestation. Develop a global method that consistently tracks where trees are growing and that complements existing tree cover loss data.
• Support the Global South and its transition to renewables. The United Nations has launched the Climate Partnerships for the Global South – also known as Southern Climate Partnership Incubator – to initiate, facilitate, and support partnerships that will help developing countries address climate change

Opportunities within the Climate Markets

Governments on both sides of the pond are enacting climate legislation that is specifically tied to cleantech.

Natural Capital Survey: US President Joe Biden’s administration will launch an effort to more accurately count the nation’s natural resources in official economic statistics, arguing the data are needed to give a true picture of US output. The administration says these stats will help track the value of land, air, water, and other natural assets in relation to the economic activity they support, in the face of climate change risks.

According to Bloomberg, China already captures such stats in what they call “gross ecosystem product.” Officials use surveys, remote sensors, and other cleantech methods to collect data on a series of environmental factors, including the health of grasslands and fisheries, forests that sequester carbon, and air pollution and other components that can affect public health.

Environmental justice priorities: To many activists, the success of Biden’s bold promises to make environmental justice and racial equity top priorities falls largely on the implementation of the Justice40 initiative, which directs federal agencies to deliver 40% of the “overall benefits” of their environmental and energy investments to disadvantaged communities.

Green jobs as part of workforce development are designed more than ever so that clean energy-related employment is going to those most in need. So, too, is converting the industrial sector that has been responsible for harm to address climate adaptation, mitigation, and resilience.

Carbon offsets are a scam: A Guardian collaborative investigation had concluded that forest carbon offsets approved by the world’s leading provider and used by Disney, Shell, Gucci and other big corporations are largely worthless and could make global heating worse.

Instead, cleantech can be incorporated with its limitless range of tech-enabled equipment and innovations, from renewable energy systems like wind and solar, to electric vehicle technology, to tech advances that reduce the need for non-renewable resources. Cleantech may help to reduce environmental impact — by saving energy, reducing waste, and performing necessary functions like remote equipment monitoring and maintenance with limited carbon emissions. Environmental technology examples include a broad range of industrial applications, as well as sustainable products, services, and infrastructure.

The UN Secretary General Outlines the Cleantech Path to Climate Solidarity

The United Nations Secretary-General António Guterres delivered a message to the 13th session of the International Renewable Energy Agency (IRENA) Assembly “World Energy Transition — The Global Stocktake” earlier this month. Guterres argued that renewables are “the only credible path forward to avert climate catastrophe, safeguard our future, close the energy access gap, stabilize prices and ensure energy security.” Here is the pathway that Guterres outlines to achieve equitable global renewable energy.

• “First — we must remove intellectual property barriers and treat key renewable technologies, including energy storage, as global public goods.
• Second — we must diversify and increase access to supply chains for raw materials and components for renewables technologies, without degrading our environment. This can help create millions of green jobs, especially for women and youth in the developing world.
• Third — decisionmakers must cut the red tape, fast-track approvals for sustainable projects worldwide, and modernize grids.
• Fourth — energy subsidies must shift from fossil fuels to clean and affordable energy. And we must support vulnerable groups affected by this transition.
• And fifth — public and private investments in renewables should triple to at least $4 trillion a year.”