Polarization in the United States undermines the global economy, international security, and migration policy. But the greatest risk rests on the perspectives to solve the most pressing environmental challenges including climate change. A few days ago, I was invited to speak at Earth X in Dallas, where I witnessed firsthand the escalating trend of polarization between Democrats and Republicans, progressives and conservatives on climate change issues.
Funded over a decade ago by Texan billionaire, Trammell S. Crow, Earth X is the largest private congregation of environmental experts, activists and investors. The meeting gathers dialogues, clean technology, and environmental services exhibits, as well as cultural and culinary events. But the cherry on the cake derives from the matchmaking opportunities between large investors and project developers in different sustainability areas. In the last 6 years, Earth X has convened over 2.500 investors from 260 companies, landing $2 billion dollars in business opportunities.
At first glance, this impressive capital mobilization in Dallas might seem like a good idea. Climate Finance is the prime engine for decarbonizing the global economy and addressing the climate crisis. According to the Intergovernmental Panel on Climate Change (IPCC), to avoid catastrophic anthropogenic interference with the climate system, greenhouse gas (GHG) emissions must be halved by 2030 and brought down to net zero by 2050. The International Energy Agency (IEA) estimates $4 trillion dollars a year of investments to finance the NetZero transition, equivalent to almost 4 times the GDP of Mexico or ⅕ of the US one.
Differences between Texas and Washington
However, there is a great difference between the solutions proposed in Texas to address climate change and the ones proposed in Washington. Among the key speakers at the Earth X summit, ex-governor Rick Perry and Texas A&M climatologist Dr. John Nielsen stood out. With political, economic and technical arguments, they dismantled the president’s Biden initiatives for decarbonizing electric power and banning the sales of gasoline cars in the US by 2035. They argued that the fossil fuel economy should continue indefinitely and the solution to the so-called “climate crisis” rests on boosting technology and innovation to make its use of energy more efficient, as well as injecting CO2 back into the ground.
While Republican lawmakers block or weaken Democrat’s initiatives to green the US economy, attorneys from state governments chase large asset managers such as BlackRock for inducing capital markets to divest from fossil fuel projects. The truth is that, in 2024, more than half of professionally managed global assets will be linked to environmental, social, and corporate governance criteria (ESG). Polarization also affects Mexico, notably in energy and environmental issues.
The United States is the most important country for achieving the goals of the Paris Agreement. Despite being the second largest GHG emitter in the world, its financial and diplomatic leadership is essential to influence gigantic emerging economies such as China and India. The polarization between democrats and republicans is not only undermining the progress of regulations and policies but also slowing ESG trends in financial markets. However, the most pressing risk rests on a potential change of administration in 2024 which could be not only regressive to domestic climate policies but also unfriendly to international processes as was the case with the President’s Trumps administration.
Climate goals only achievable in a less polarized world
There is a perception that the UN has not been effective in addressing the global climate crisis. The truth is that progress is notable. Before the adoption of the Paris Agreement, the temperature increase pathways for 2100 showed an apocalyptic 4°C. Today the outlook is set at 2.5°C with stronger commitments from countries and companies. But make no mistake, the goals set in the Paris Agreement will only be achievable in a less polarized world.