Focus on innovation to fight climate change

Climate change represents the bad kind of disruption because it poses an existential threat to humanity. But it can, and must, be fought with the good kind of disruption: innovation. Since the Industrial Revolution, disruptive innovation has generated growth, created jobs and opened new avenues for investment.

In the case of climate change, it could save humanity by accelerating global efforts to reduce greenhouse gas emissions. Innovation will be absolutely necessary for a successful transition to a green economy that leaves no one behind. Without it, we have less chance of achieving genuine sustainability.

To understand the extent of the threat posed by climate change in the event that we do nothing, consider where we are today. Average global temperatures have risen by almost 1 C above pre-industrial levels, owing to the accumulation of greenhouse gases in the atmosphere. Two-thirds of that increase have occurred since 1975. If the trend continues, global average temperatures could rise by 4 C by the end of this century.

Our climate is fragile. Small changes in surface temperatures will cause big problems. When average temperatures were 4 C below pre-industrial levels, much of Europe was buried beneath several kilometers of ice. Imagine what a world that is 3 C warmer than today might look like.

Nonetheless, I am confident that disruptive ideas are out there. Floating wind farms, for example, can unlock clean wind power for dozens of countries whose coastal waters are too deep for traditional offshore facilities. Advances in technologies based on waste-eating bioluminescent bacteria promise to illuminate our streets and factories.

To bring these solutions to scale, we need to put more financing into the right hands. We need to encourage industries to pursue more breakthrough technologies. For example, the European Investment Bank, the European Commission, and Breakthrough Energy Ventures, an investor-led fund, established a 100 million euros($110 million) fund in 2019 to support disruptive investments in clean energy.

Innovative disruption needs to happen fast. According to the International Energy Agency, only seven of the 45 energy technologies and sectors assessed in its most recent Tracking Clean Energy Progress report are on target to meet its Sustainable Development Scenario, which is aligned with the global commitments enshrined in the 2015 Paris climate agreement. Hence, for the policymakers, technologists, executives and entrepreneurs, the question is: Where do we go from here?

Citizens across the European Union and around the world are demanding action to tackle climate change. This growing awareness of climate risks is filtering into the public debate. Moreover, under its new president, Ursula von der Leyen, the European Commission has proposed a European Green Deal to enshrine 2050 carbon neutrality targets in law with the goal of positioning Europe as a leader in the circular economy－a system aimed at eliminating waste and the continual use of resources－and clean technologies of the future. Europe could reap significant economic benefits as a first mover on climate action.

But European industries first must show that they want to be part of the effort. They need to innovate, create new solutions, bring new products to the market and get to work on breakthrough technologies. Investments are urgently needed to drive down the cost of new technologies, increase efficiencies, support first movers and create new markets.

Even if the private sector is committed fully to climate action, business leaders cannot ignore the bottom line. Putting money into new technologies and business models is risky, and outcomes are never guaranteed.

This is where public investment banks have a key role to play. As Europe's climate bank, the EIB intends to expand its support for Europe's transition to a sustainable, zero carbon economy.

Identifying promising green projects and directing capital toward them is a major challenge. Yet, acting as incubators, development banks like the EIB can mobilize the private sector behind such investments. By offering innovative financial instruments, experience and expertise to investment partners around the world, public institutions can empower inventors, entrepreneurs and large companies to take on the climate challenge.

The author is vice-president of the European Investment Bank. The views do not necessarily reflect those of China Daily.