With the 50th World Economic Forum kicking off in Davos, our newsletter turns to the broad-scale economic solutions needed to combat climate change. As we showed in part-1 of this newsletter last week, we need real changes in individual sectors to deliver a climate neutral economy. However, this action must be underpinned by supportive macro-economic action.
The EU’s agreement on the creation of the world's first-ever “green list” or taxonomy at the end of 2019, established a framework to define green investment. Coupled with the withdrawal of the European Investment Bank from fossil fuel funding, sustainable finance is finally ready to back climate action with the funding it needs. Positive steps such as these must not be undermined by short-sighted macro-economic policies. If the response to a future global financial crisis funded high-carbon activity, for example, it would undermine the impact of all the work going into decarbonising individual economic sectors. Macro-economic policy must also not ignore the systemic challenges we face from climate change, but rather start managing the risks associated with stranded fossil fuel assets as we move to net zero.
In this newsletter, we reflect on some of our macro-economy work. Felix Heilmann and Alexander Reitzenstein launch a new report examining how prepared the German economy is for a climate neutral world – not as well you might wish for, I’m afraid. In Washington, George Triggs and Claire Healy dig into a playbook to encourage more climate-friendly macro-economic policies. Kate Levick and I look at potential responses to a future economic crisis from a sustainability lens. Finally, Dileimy Orozco, spurred by recent media coverage, writes an elegant reflection on the role of central banks in responding to the climate crisis.
In future Clean Economy Newsletters, you will be able to read more about macro-economics, along with major political, social and economic issues associated with cooling. We will also look at the implications of broader trends in trade, digitisation, and land-use. Our goal, as ever, will be to work to achieve climate neutrality faster and with better outcomes for everyone in society.
If you would like to discuss any of the issues in this or last week's newsletter, please don’t hesitate to email me or get in touch directly with any of the authors.
Thanks for reading,
Programme Leader, Clean Economy