Private Sector Involvement in Government Climate Change Initiatives

Summarized by Nobel Prize winning economist William Nordhaus in a simple metaphor from Climate Change: The Ultimate Challenge for Economics, "Climate change is like a vast casino...we are rolling the climate dice, the outcome will produce surprises, and some of them are likely to be perilous" (Nordhaus, 2019). Within the 21st century, similar statements of the vitality of climate change action have increased dramatically around the world, backed by the increasing environmental havoc and following societal adaptation.

Take, for example, the steps being taken by the Tofina tribe, displayed within "How to Build a Resilient Future Using Ancient Wisdom" by Julia Watson. Developing the largest lake city within Africa, the houses are constructed upon stilts, and neighborhoods are navigated by canoes. However, these efforts will merely not be strong enough to escape Nordhaus's treacherous and high-cost "climate change casino" over time.

As society grapples with the overwhelming task of fighting climate change, it becomes clear that mankind currently stands unprepared and incapable. Only one industry contains the firepower to lead to mitigation and adaptation to climate change; the private sector. Yet, this group often lacks involvement. With many experts in the field raising awareness about this discrepancy, the question becomes: To what extent could promoting greater private sector investment into environmental initiatives impact global resilience against climate change? With greater analysis, it becomes clear that promoting greater private sector investment into environmental initiatives would do a great deal in strengthening global resilience against climate change.

Background

The private sector can be defined as the segment of an economy run by individuals and corporations aimed at making profits, rather than under the control of governmental agencies. Controlling an estimated $143 trillion of wealth held within private banks alone (Goldstein et al., 2019) the private sector combined is among the most powerful and influential entities within modern society.

Private Sector Funding

Among the biggest complications within current climate change initiatives is the lack of funding and access to capital. According to International Monetary Fund data, current global investment to address climate change sits at $630 billion (Public Sector Must Play Major Role in Catalyzing Private Climate Finance, 2022). While an impressive sum, the issue becomes discernible as the estimated overall monetary amount required to meet current international initiatives are presented.

Within the same study and analysis presented by the IMF, approximated costs in order to properly strengthen global climate change resilience are found to be within $3 trillion to $6 trillion per year until 2050. In comparison, data from The U.S Currency Education Program lists the current amount of U.S. currency in circulation at $2.2 trillion. Accounting for all physical capital flowing within the United States, this aggregate appears as an unfathomable sum from an individual viewpoint.

Data from The World Economic Forum's "Climate adaptation: the $2 trillion market the private sector cannot ignore" displays just this. According to the research, only 1.6% of climate adaptation investment funding is provided by the private sector, leaving large gaps public funding is left to fill.

Development and Innovation

An additional support for the argument that private sector involvement and investment into climate change initiatives would beneficially impact worldwide resistance and resilience against climate change ties into modern technology and innovation. Throughout history, it is evident that society has the capability to adapt and overcome the environmental challenges it faces.

One specific showcase of the technological abilities society contains to combat environmental difficulties is the study discussing Daphnia microbes. The program enabled fleas to consume cyanobacteria, an organism that can severely overrun ponds. With an end result containing state-of-the-art water quality technology, it is small yet vital projects like these that society needs in order to build global climate change resilience.

Private-Public Partnerships

A final benefit to promoting greater private sector investment into climate change initiatives is the encouragement of collaboration between the private and public sectors, a step indicative of project success over time. In the study led by Tina Schneider of the World Resources Institute, data is presented on the private sector connection into public sector climate action, focusing specifically on Germany.

A large part of this connection involves basic facilities, with the study listing that "80% of critical infrastructures are now privately owned." The Public Private Partnerships project failure rate is below four percent, with only 292 out of the 8295 projects between 1990-2020 failing.

Conclusion

The future remains uncertain as society faces down an environmental catastrophe. With an empty canvas of numerous potential outcomes, taking action against climate change has never been more important. As risk and uncertainty grows, it becomes clear that society stands off guard for the challenges facing us. However, with research, it becomes clear that an intrinsic and influential player remains in the background: the private sector.

As displayed within the previous paragraphs, vast amounts of benefits would occur from the involvement of the private sector. This incorporates the steps towards adaptation and mitigation, such as financial, technological, and collaborative aspects. It becomes clear that promoting greater private sector investment into environmental initiatives would strengthen global resilience against climate change. Beneficial to all parties involved, initiative can be taken today to secure a greener future for all.