Government Alone Can’t Save the Planet

We often look to governments as the main negotiator of climate action. In response to growing global environmental disasters, the 1968 United Nations Conference on the Human Environment was held in Stockholm, Sweden. Since then, governments have addressed climate change and the environment through multilateral treaties and agreements. The United Nations Framework Convention on Climate Change (UNFCCC) has since been the principal organizer of international environmental meetings like the Conference of the Parties, leading to the establishment of agreements like the Kyoto Protocol and the Paris Climate Accords.  

Governments are the entities with the largest workforces, and they have the ability to mediate agreements and enforce policy through internal law. They also, frankly, often have the deepest pockets. However, while an estimated $321 billion was spent by governments on climate investment from 2019 to 2020, some estimates indicate that an additional $4.13 trillion must be spent on environmental causes by 2050 to meet all current climate goals. 

So how will the gap be filled? Can we expect governments, more capable and with greater means, but slow-moving and subject to changing agendas, to increase investment sufficiently in the next 30 years? Or are there other potentially untapped means of climate action available? 

The Government Approach 

The United States alone is a signatory to dozens of environmental treaties, both large and small. The Paris Agreement, often pointed to as the most comprehensive climate measure undertaken by the world’s governments, has 196 signatories each with their own individual goals and outcomes tailored to their unique contribution to environmental outcomes. Signed in 2015 at the COP21 meeting, it is best known for its goal of keeping global temperatures from increasing more than 2 degrees Celsius.  

But already the agreement is being put to the test. A report by the Columbia University Center on Global Energy Policy found that of 65 countries that had committed to net-zero emissions by 2050, only 14 had signed these targets into law, with most of them still in the discussion phase seven years out of the initial Paris Agreement. There can be significant challenges to individual countries when trying to implement international agreements into national policy. 

Additionally, international conflict has greatly slowed the progression of climate action around the world. The Russian invasion of Ukraine, coupled with reactions by the international community, has made it difficult for heavily polluting industries, like coal-fired power plants, to shut down. This is likely because of Russian tampering in energy markets as a reaction to further sanctions against that country. As a result, further development of cleaner energy sources may be delayed, leading to lower adherence to international climate agreements.  

Another unique feature of governments that can impede climate action is the changing of administrations and agendas. The United States signed the Paris Agreement under the Obama Administration, which signaled to the world that environmental action would be endorsed and, in some aspects, led by the U.S. However, under the subsequent Trump Administration, the changing agenda and general climate denialism that dictated that agenda saw the U.S. pulling out of the agreement, putting international climate goals into turmoil. Four years later, the U.S. rejoined the agreement as part of an Executive Order by the Biden Administration. This demonstration of the rapidly changing agendas of governments highlights the difficulty for governments to be the only ones at the helm of climate change action. With hundreds of governments along varying ends of the political spectrum, distinct action by governments can be difficult to achieve.  

Is the Private Sector a Solution? 

There is enormous untapped potential from the private sector to bridge the funding gap and achieve global climate goals. There’s also a major reason why this sector should offer this funding: the 2017 Carbon Majors Database report showed that just 100 private companies were responsible for over 70% of global greenhouse emissions. The reality is that those who do the most emitting are also the most capable of reducing their emissions. This should be viewed as a necessary response by this sector to remediate the environmental damage they have already caused for profit.  

Markets can also be nimbler in their response compared with governments. The private sector can more rapidly respond to changes as they do not have to work through the typical process that governments use, which is often bureaucratic and slow-moving. These markets also respond to profits, meaning they will typically adjust their approaches to quickly absorb as much profit as possible. These abilities should be leveraged to create quicker responses to the environmental crises.  

Private sector investment is also a minuscule amount of current investment in climate adaptation funding. According to the World Bank, just 1.6% of all adaptation funding is provided by the private sector.  

Motivating the Market 

Incentive structures can be provided by governments to pave the way for a significant increase in investment by private sector entities. The United Nations already provides resources for understanding private sector involvement in climate investment with their “Ecosystem of Private Investment in Climate Action” report. The report helps potential private sector investors to understand the role their investments play in the environment already, and how they can better position themselves to contribute positively to climate goals.  

Critically, the message should not be that governments are incapable of rising to meet the financial challenge of climate change. The inability for governments foot the entire bill for environmental programs should spur action to involve the private sector. Not only can private markets help to go the final distance, the financial incentives should be there to encourage these investments. Only through a united financial approach can we hope to address the financial toll of climate change.