Hope is one thing, reality quite another. The climate conference COP26 will not only reinstate the goals from the Paris Climate Agreement from 2015 (COP25), but also strengthen them. At least that is what the world hopes for. Pledges about ‘net zero’ abound, but the reality is that there are no concrete plans on the table in Glasgow to get in line with a 1.5-degree scenario. In all honesty, there should hardly be any hope that global heating remains limited to 1.5 degrees. If we accept that, we are all to blame. If we all do what is in our power, we may yet start the necessary transformation.

No systems change

As the World Resources Institute writes in its recently published report; incremental change is not enough; we need systems transformations. It’s hardly likely that COP26 will be the beginning of that systems change. There's not much chance that the delegates of almost 200 countries gathering in Scotland will agree to jointly bear the economic and political pain to make the kind of radical emissions cuts needed to achieve that goal. While in economic theory it is so simple. Just price those external effects. And if that is not possible for whatever reason: rationing. Granting carbon rights to individuals, companies, or countries. These are feasible solutions, yet they won't be implemented. The lobbies are too strong, the short-term interests too great, the politicians too weak, citizens too angry or indifferent. And if, for example, investors do try to change the course by excluding fossil fuels, there are other market parties, such as hedge funds, who see profits to pick up. A clear case of market failure that many economists and policymakers find difficult to admit. And all the while our climate and our ecosystems deteriorate further.

Our responsibility

So, what then? Another round of deliberation and discussion, with rich countries unwilling to support emerging countries financially in speeding up decarbonisation, with the whole world waiting for technological breakthroughs or other miracles that will fix our climate and our ecosystems. Sorry, but that won’t bring anything.

Who is responsible? Not governments, not consumers, not even big polluters; it’s us as humans who are responsible. And let’s be honest: it’s us in the developed, rich countries who bear most of the responsibility. With our enormous production and consumption levels, we have always been the largest CO2 emitters. Our abundance is the prime reason for deforestation and loss of biodiversity.

Finance and markets

The financial sector has been an important part of the problem. It now has the chance to transform into an important part of the solution. A lot of financial sector participants pledge for net-zero in 2050, some earlier. Great! The financial sector is becoming a positive force in fighting climate change. But how does that work in practice? For some, it means divesting from certain polluting sectors. For others, it means investing more in green solutions. Both help to channel capital in the right direction.

More is required, however. We see already short-term capital, such as hedge funds, jumping on fossil companies. We also see that mature green assets become increasingly less attractive from a financial perspective because demand is larger than supply. Both effects mitigate or complicate the intentions of green investors.

The conclusion is that we cannot leave it only to the market to decide what is harmful and what not. More regulation is required: pricing, limiting, and forbidding what is harmful. Current regulation focuses on determining what is green. To speed up the necessary transformations, it is more important to make clear what it is hampering them. Only through regulation can we make clear which investments are harmful and risky, how they detract from the goal of absolute zero. Only through regulation will capital be steered in the right direction. Ultimately, stranded assets are a political decision.

But where does that leave our own responsibilities? We have different roles: as consumers, as voters, as employees. In all these roles we can make a difference by showing what is possible. The incremental change you can achieve as a person or as a company can inspire others to do the same. Many small steps build transformations. This is the way we must go. But we need to move fast. All of us, starting right now. Forward to zero!