Fresh global model needed in climate change fight

The challenge of climate change marginally involves "classic" environmental policies. While China leads in the transition to clean energy, global goals can only be achieved together, and a just transition is a net-zero cooperation game.

The agreement reached at the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change, or COP28, held in the United Arab Emirates from Nov 30 to Dec 13, signals the beginning of the end for the fossil fuel era, with a tripling of renewable energy capacity sought by 2030. The death of old industries is the birth of new ones. And a new economic model should be based on the real value of assets, starting with natural assets and moving away from the not-always-rational mechanisms of finance.

The global environmental challenge of climate change requires policies both to reduce the carbon intensity of the economy as well as to enhance carbon sinks, which are natural systems, such as forests and oceans, that absorb more carbon from the atmosphere than they release. Incentives for energy, industry, transportation, agriculture and taxation are the main sectoral policies to be involved in addressing climate change.

A recent analysis published by Carbon Brief, a United Kingdom-based website covering climate issues, shows that China is witnessing a massive shift in industrial investment toward green economy sectors. The main beneficiaries are renewables, batteries, electric cars and power grids, as well as railways, all of which have become major drivers of the country's economy.

In China, the race to renewables is accelerating further, hinting at the emergence of a new industrial model. In 2023, China's growth was fueled by clean technologies, which accounted for 40 percent of last year's GDP expansion.

Chinese investment in clean energy has reached $890 billion, a sum close to the GDP of Switzerland or Turkiye.

Beijing is investing in energy, economic resilience and strategic autonomy.

As China's climate negotiators recently pointed out, the target agreed to at COP28 of tripling global renewable energy capacity is a big plus for China's new energy industry. It is also likely that China will step up its efforts to finance and develop clean energy projects abroad.

Massive investment in production capacity and exports of clean technologies mean that China is crucial to the success of the ecological transition in the rest of the world, creating export markets, affordable products and economies of scale.

Globally, China's unprecedented boom in clean energy production has driven down prices: The cost of solar panels has fallen a further 42 percent year-on-year, a dramatic drop even compared with the historical annual average of around 17 percent, while battery prices have fallen more than 50 percent.

The significance of this cost-effectiveness to the global transition is clear. China is changing the world's industrial scenarios. Most of the additional solar deployment in the International Energy Agency's revised projections will be in China.

The pace of China's great green march is set by the ambitious social and economic transformation plan that Beijing has drawn up, along the lines of the European Green Deal.

But as elections approach, some European politicians are getting cold feet and backtracking on the Green Deal, while the Chinese are implementing it.

Italy, for example, is paying dearly for its dependence on fossil fuels, with a loss of industrial competitiveness and an increased strategic dependence on other countries.

China's advantageous rise raises the question of how to link inescapable climate strategies with national industrial growth in Europe and the United States. This also raises the question of "cooperative competition" in markets.

The specter of Chinese overcapacity should not lead to unnecessary and destructive trade wars. It should lead to enhanced collaboration via a division of international labor according to agreed upon rules, and industry and technology standards that guarantee a level playing field for global eco-industry.

The Italy-Africa summit late last month indicated a new page for energy plans for Africa. Already, many African countries are asking why they should be tied to a fossil colonialism instead of embracing the economy of the future.

Teresa Ribera, Spain's minister for ecological transition, said recently that by opposing the Green Deal, conservative parties are fueling the populist vote. She is right. They are also condemning themselves to irrelevance. With some notable exceptions like Ribera, European politics are shortsighted.

Addressing climate change requires a global shift toward a new model combining economic and environmental efficiency, and a just transition will be the fruit of worldwide cooperation.

The author is a partner and board member of management advisory company Brainscapital.