The history of the modern world is filled with many examples of global policies that started out in earnest only to reach a point in time, much later on, where the sunk costs far outweighed the originally intended for benefits.
Take the UNO for example, 78 years and about half a trillion dollars in costs later, would you say it still stays true to its original mission statement? Or has it reduced itself to an expensive debating club with a fancy New York address?
Again, while not a global policy, think about the long-term ramifications in China after its One-Child Policy. The policy, enforced in 1979 and estimated to have prevented 400 million births, was ended in 2016. It was too little, too late. China’s demographics had imploded by then.
It’s not all gloom-and-doom though, some global policies, like Nuclear Non-Proliferation have turned out to be sleeper hits, after initially having met with a lot of scepticism.
In the current era, global policy frameworks around Climate Change cannot afford missteps.
There is very little room for error since the stakes are very high, running into multiple trillions.
Risks abound though. Due to policy U-turns by key actors. Due to a lack of consensus. Or, simply due to differences around the preferred choice of pathways or approaches by the various actors towards Net Zero.
These risks cannot be wished away and are also often idiosyncratic in nature and so the measures to mitigate them could lie well outside the traditional playbook for implementing policy actions.
Take the US elections of 2024 for example. It appears that Trump has zeroed in on his bugbear for Election 2024 ─ and its Climate Change!
Think about the ‘stall’ that a rollback of the Biden regime’s climate laws, tax breaks, subsidies and policies could create for the Net Zero movement?
Other factors may also emerge. Due to a lack of cohesion around approaches.
The energy watchdog, International Energy Agency (IEA), has made it clear that energy producers must allocate half of their annual investments towards renewables: a point that doesn’t appear to sit well with some large energy producers who instead prefer to invest in Carbon Capture Projects.
You only need to look at recent reports of South Korean EV battery manufacturers scaling down their investments in the US to realize how a lack of policy clarity around Climate Change befuddles the private sector around their capex decisions.
All this is indicative that policy clarity and cohesiveness among all the actors (both within the global public and private sector) is the need of the hour.
This is precisely what makes COP28 UAE significant since it marks the conclusion of the first ever Global Stocktake, which aims to take stock of global action against climate change and pave the way for further actions in the future.
Both the private sector and the investor community (wary about getting wrong-footed) will watch the events unfolding at COP28 UAE closely.
