The World Economic Forum has launched a new initiative that they are calling “The Great Reset”. Its purpose is to help “guide decision-makers on the path to a more resilient, sustainable world beyond coronavirus”
At first glance it can look like virtue signalling by some of the world’s elite. The WEF’s annual Davos forum, which it has run for over 30 years, is viewed, justifiably, by some as a just a talk fest with little action. Others see it as calling for reforms but really wanting to maintain the status quo.
At last year’s January Davos meeting Nik Gowing reported that there was an “Oh sh_t” realisation that economic systems needed to change to address climate change impacts (or rather ensure that their businesses had a future). But attendees didn’t really know what to do.
At this year’s meeting – where the Pandemic apparently wasn’t on any attendee’s radar – Gowing noted that the resolve to act was a given. Less certain was what the system needed to transition to.
Transitioning to what, and how?
That’s the feeling I get with “The Great Reset”. It sounds like a marketing tag line. And “reset” gives the impression of a quick and simple fix – Control-Alt-Delete. Maybe it is a case of trying not to scare the corporate horses too much. But it should be obvious that profound and uncomfortable changes, over the long term, will be necessary.
To their credit, in recent times the WEF has worked with groups such as the World Wildlife Fund for Nature, Greenpeace, youth groups and civil rights organisations. So it isn’t an echo chamber.
The WEF is holding virtual “Great Reset dialogues” – open to anyone – through the rest of the year as a lead up to a big Great Reset event early next year. Hopefully these dialogues will provide clarity not just what needs to be reset, but what we need to be transitioning too, and some of the key steps along the way.
Follow the money …
Much of the focus on a post-pandemic world and shifting to a low carbon economy is on financial incentives.
Asset management firms (alongside insurance companies and pension schemes) began divesting from fossil fuel companies before the pandemic. If that continues the effect will be significant.
Governmental responses to the pandemic include recovery packages that emphasise low carbon initiatives.
Germany, for example, has a €50 billion “future package” to fund R&D, green transport programmes, hydrogen infrastructure, and improving building energy efficiency.
The European Union is touting a “green new deal”, yet to be agreed by member states. In this €750 billion package 25% of funding is set aside for “climate action.” This includes making homes more energy efficient, decarbonising electricity, and phasing out petrol and diesel vehicles.
However, in many cases the majority (Bloomberg New Energy Finance estimates US$509bn) of stimulus money governments are providing is going to carbon intensive industries (such as energy companies & airlines), with no conditions to ensure they reduce their carbon output.
While central banks may acknowledge the need to address climate change, their responses often don’t match the rhetoric.
The gas industry is a big winner from the Australian government’s stimulus spending.
In New Zealand there is opacity over the extent to which infrastructure stimulus spending will incentivise low carbon transitions.
… But not just the money
It is a mistake to just focus on how much governments and the private sector are (or aren’t) allocating to reducing carbon emissions.
For a real transition other factors need changing too. As I discussed in the previous post, it involves providing other incentives, as well as “releasing [some] brakes”, as Tim Harford puts it.
These include changing institutions, behaviours and practices.
One good example is ownership of renewable energy systems. A policy paper from the Rosa Luxemburg Stiftung highlights the need to address issues of inequity and community resistance to renewable energy. It proposes a “Wind commons”, where ownership is at the community level rather than with energy companies.
So, a “Great Reset” is too simplistic if it is largely financial. Multiple “resets” and new approaches are needed. It is good to see the “Davos Men” (and women) making a belated move, but it shouldn’t just be left to them, or government investments, or undertaken on just their terms.