There are many ambitious goals regarding climate change: China has pledged to reach carbon neutrality by 2060 and have its emissions peak by 2030. The United States aims to reduce emissions 52% by 2030. The European Union has committed to generating at least 55% fewer emissions by 2030. Are these goals achievable?
“They certainly are,” said Tom Raftery, Global Vice President, Futurist and Innovation Evangelist at SAP. During his presentation titled The Sustainability Imperative at the LEAP conference in Saudi Arabia, Raftery cited three trends that are converging to create a massive shift with long-term benefits for the planet: the cost of renewables has plummeted, new laws and regulations are taking effect, and new business models are changing the game.
Understanding the costs
Someone once said that the Stone Age did not end for lack of stones, but because bronze tools became available. “Likewise, the Age of Fossil Fuels is not ending because we’re running out of oil and gas and renewables are becoming cheaper,” said Raftery.
According to a new report by the International Renewable Energy Agency (IRENA), renewables were the cheapest source of energy in 2020. There are some simple reasons for this development.
The first has to do with the cost of fuel. The price of power generation depends on two factors: the price of the fuel burned and the costs of operating the power plant. Renewable energy plants, however, don’t have to dig up or transport wind and sunshine, so they are just paying for the technology needed to collect and distribute energy.
The second reason has to do with the cost of technology. While the price of solar technology initially was very high, the cost declined as more and more solar modules were produced. The production process was improved, leading to a continuous cycle of increasing demand and falling prices making the new technology cost effective.
The third reason is the rise of Industry 4.0. Increasing connectivity, smart automation, and the intelligent networking of machines and processes make it possible to collect and use data to optimize performance and reduce maintenance through predictive analytics.
Now, in many places around the world, power from renewables is cheaper than power from new fossil fuels.
The legislation
As Martin Luther King Jr. once said, morality can’t be legislated, but behavior can be regulated. Even though scientific evidence indicates it is possible to avoid the worst impacts of climate change if we reach net-zero carbon pollution before 2050, some legislators and enterprises have refused to act, preferring to risk climate catastrophe rather than sacrifice profit or power.
Vague goals are not enough, so governments are creating legislation that will compel businesses, organizations, and public entities to commit to specific targets and comply with climate laws and regulations.
The European Climate Law, for example, has made it a law for Europe’s economy and society to become climate-neutral by 2050. This means achieving net-zero greenhouse gas emissions for all EU countries by cutting emissions, investing in green technologies, and protecting the environment. The law ensures that all EU policies contribute to this goal and that all sectors of the economy and society play their part.
While there is no overall policy approach to climate change regulation in the United States, many states are taking steps to battle climate change through legislation. Many of the New England states, for example, are joining forces and putting strong, enforceable climate laws on the books.
Even without legislation, it is possible to change behavior, and there are plenty of initiatives around the world dedicated to doing the right thing when it comes to climate change. Saudi Arabia, for example, will generate 50% of its energy from renewables by 2030. To achieve this goal, the country has set impressive goals in the Saudi Green Initiative, such as planting 10 billion trees in the desert, that will help position the country as a global leader in sustainability.
The new model
The last factor that makes SAP’s futurist optimistic about the future is the product-as-a-service business model, one of the cornerstones of a circular economy. In a linear economy that takes, makes, and wastes resources, the focus is on selling the maximum number of products. The product-as-a-service business model provides the same products to the maximum amount of people, over and over again. Instead of buying and owning a product, this approach includes leasing, renting, or pay-for-use agreements. It allows customers to purchase a service or desired result, rather than buying the product itself.
The City of Los Angeles is a shining example of how it works. Instead of buying, owning, and maintaining its city lights, the city is buying its illumination from Philips, a technology company that provides everything the city needs at a price per lumen, a measure of the total quantity of visible light emitted by a source per unit of time.
Thanks to the "iPhonification" of the automobile, the car will soon become the most complex Internet device known so far and become a software product. Similar to Apple’s iPhone Upgrade Program, where you pay a set amount every month and swap your iPhone for a new one every year, car makers are now starting to embrace the car subscription model. Often referred to as mobility as a service or transportation as a service, the deal includes long-term rental, mileage, insurance, maintenance, taxes, and even the management of tolls and fines.
Thanks to the low cost of renewables, new climate legislation, and new models that are conducive to circular business practices, Raftery concludes there’s no reason why climate goals cannot be achieved.
Learn more about regenerative business models here.
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