Davos Predicts A Stormy Year Ahead, But Every Story Has Two SidesMaría Mendiluce
“We face a fractured world and growing societal divides, leading to pervasive uncertainty and pessimism. We have to rebuild trust in our future by moving beyond crisis management, looking at the root causes of the present problems, and building together a more promising future.”
These were the words of Klaus Schwab, the founder of the World Economic Forum ahead of the organization’s annual meeting of business and political leaders, philanthropists and notable non-profit names in Davos, Switzerland earlier this month.
When creating WEF in 1971, Schwab’s vision was of making the world a better place. “We believe that progress happens by bringing together people from all walks of life who have the drive and the influence to make positive change,” says the organization’s mission statement. Yet, today, the very idea of “progress” appears to be at risk.
The tone at Davos this year was set by the WEF’s 2023 Global Risks Report, published as the meeting opened. It describes the world as “plagued by a duo of dangerous crises: climate and conflict” and raises the issue of “economic uncertainty”.
The war in Ukraine, conflict in Gaza and upcoming elections across the world – especially those in the US and EU that could change the prevailing political landscape – can all slow or hamper the development of government policies needed to reduce “uncertainty”. This is particularly the case with climate action which can be disrupted by near-term political priorities.
Everybody can see – whether on the right or left of the political spectrum – that our climate is changing. Today in Geneva temperatures are 8C above the average for the same day since 1970. London is 5C above and New York 2C.
Climate denier politicians can’t change the reality of climate change: just talk to farmers on the front line of the climate and nature emergency in any country. The political reality should not be whether you believe in climate change or not, but which policies will be the most effective in tackling it.
Strong climate policies in some countries are already showing us how much can be achieved when governments develop robust, thought-through regulation, legislation and guidance.
Spain produced just over half its electricity from renewable sources in 2023, after many years of policies that created an enabling environment for renewable energy. Fossil fuel generation has been reduced to less than 15% and consequently emissions are down 7.5%. With an average cost in the last 18 months of around €100 per megawatt hour (€102.64/MWh), Spanish prices are much more competitive than neighbouring countries such as Germany (€161.48/MWh), France (€175.82/MWh) and Italy (€207.88/MWh).
In this context, countries that lead the way in cheap renewable energy can attract electricity-intensive companies, which can, in turn, completely transform industries and economic growth. As with any system update, there are still gaps that need to be bridged, and the renewable energy sector needs to further develop energy storage and intelligent grids.
Another good example is Norway where 90% of the cars sold today are electric, and after many years of incentivizing the shift to electric, half of the vehicle stock in the country is electric.
Right now, one country is way out in front in the race for renewable energy and electric vehicles. China added more solar panels in 2023 than the US has in its entire history. China is set to double its renewable energy capacity and produce 1,200 gigawatts of energy through wind and solar power by 2025, reaching its 2030 goal five years ahead of time. More than half of the electric vehicles on roads worldwide are found in China.
Many businesses get this side to the story. The economics are already in favour of wind and solar power compared to new fossil fuel power stations, and the competitiveness of other technologies like electric vehicles and batteries is also becoming a reality. Volvo plans to be a fully electric carmaker by 2030 and carbon neutral by 2040. Danish energy company Orsted has restructured away from fossil fuels and is now the world’s largest developer of offshore wind power, aiming to be net zero by 2040.
And companies the world over are only too aware of the costs of disruptions from extreme weather events, whether it be crop failures because of drought, damage to equipment or factories from flooding, or delivery delays as rivers and even major transport arteries like the Panama Canal run dry. In the face of more frequent and more extreme impacts, many companies are working hard to reduce emissions to contribute less to global temperature rises and to make their operations more resilient.
It should not be denied that the potential political change in the US and EU is likely to impact climate action and other legislation. However, there are many players in the game — not least the businesses that are experiencing climate change impacts, and seeing the economic opportunities of the energy transition away from fossil fuels or in regenerative agriculture.
Countries and local and national governments are competing to get the first mover advantage derived from climate action, reduce costs and increase sales. It will be a misjudgment for politicians and newly elected officials to ignore this.
The world this year is a challenging place, but if companies keep a firm hand on the climate action tiller, there is no reason actions agreed at COP28 in Dubai in December — namely to triple renewables and to double energy efficiency by 2030 and above all to move towards phasing out fossil fuels — will be blown off course by politics. There is still room to believe we can achieve and build together a more promising future. There is always another side to the story.