Climate action must rise above politics before time runs out

This must not distract us from the current state of the planet and the real economy. The effects and costs of climate change are increasing. Extreme weather events, from hurricanes in the Caribbean to catastrophic floods in Europe and droughts in the Amazon, are growing more frequent and intense, enhancing the risk of financial instability, especially in the world’s most vulnerable and highly indebted countries.

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At the same time, an energy revolution is already in full swing: deployment of renewables is growing exponentially and annual investment in clean power sources now far exceeds that in fossil fuels. Citizens and companies are also increasingly aware of the need to invest in climate-change adaptation.

The European Investment Bank Group’s (EIB Group’s) most recent climate survey shows that 94% of Europeans and 88% of Americans support adaptation measures, while around half of respondents say that such measures should be a national priority.

Economic growth is decoupling from carbon emissions, owing to breakthroughs and innovation in clean-energy generation and efficiency technologies that help combat climate change and boost competition. The EU has been a pioneer in this area, cutting greenhouse-gas (GHG) emissions by more than one-third since 1990, over which time its economy grew by 68%.

The International Energy Agency forecasts that renewables will meet nearly half of global electricity demand by 2030. Emissions from the EU, US, and most advanced economies are declining even as their economic output expands, while China’s may peak this year—much earlier than expected.

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After years of warnings and calls for action, there are finally signs that the green transition has shifted into high gear. The reason is simple: clean energy is now cheaper and more efficient than fossil fuels, largely owing to improved battery storage. As a result, the right thing to do for our planet is now also the smart thing to do for our economies.

Every dollar invested in climate adaptation and resilience can save between $5-7 in future disaster costs, not to mention lives and livelihoods.

Most businesses are well aware of these savings and have acted accordingly. Around 60% of the more than 12,000 firms across the EU and US surveyed by the EIB Group are investing in the green transition, while 90% have taken measures to reduce GHG emissions.

Reducing waste, lowering costs, and bolstering resilience make good business sense. It is this, more than international pressure, passionate rhetoric, and public commitments, that will encourage companies and investors to finance the decarbonization of the global economy.

At the EIB Group, we commit more than half of our annual lending (nearly €50 billion per year) to projects accelerating the green transition in Europe and beyond. Investing in climate resilience and adaption at home safeguards our infrastructure, agriculture and livelihoods, and enables a robust, rapid recovery from disasters, such as the deadly floods that inundated entire towns in Central Europe in September and surged through my home country, Spain, in October.

But a successful transition is one that is both swift and just, ensuring that no one is left behind. Developing countries and low-income households are more vulnerable to the perils of global warming and the distributional impact of green-transition policies, as emerging technologies disrupt legacy industries and established business models.

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The EIB is therefore increasing its share of green investments outside the EU, supporting small island states at the front line of climate change, financing resilient infrastructure around the world, and fostering the global green-bond market.

Multilateral development banks have taken the lead on this front, investing a record $125 billion in green projects in 2023, and doubling the amount of private-sector finance mobilized compared to 2022. In addition to exceeding our pledges, we are committed to working together to continue mobilizing climate finance in the coming years.

Global cooperation is the only way to drive planetary-scale transformation. The green transition is underway, partly thanks to our joint efforts. But we must stay the course, building on existing international fora and decision-making frameworks to find win-win solutions that reinforce the security, stability and well-being of all countries. ©2024/Project Syndicate

The author is president of the European Investment Bank.