Pillar 3: Phase out carbon-intensive activities

Despite the immediate threat posed by climate change, national governments continue to build thermal power plants, subsidize the burning of fossil fuels or underwrite their extraction through state-owned companies. Over 2010-2021, fossil-fuel fired capacity grew by over 1,000GW, with coal accounting for more than half. Despite climate pledges, the world added over 220GW of new coal- fired power generating capacity since the Paris Agreement.

Phasing out high-emitting sources and scaling back subsidies that artificially cap consumer gasoline and electricity prices can be politically challenging. However, these are fundamental measures to limit global warming.

Many assets in the real economy are long-lived, ranging from around 15 years for cars and buses, up to 50 years for fossil fuel power plants, and 100 years or more for buildings. However, many of these will need to be retired early to get the world on a 1.5- degrees trajectory. This will require a transformation of the corporations, utilities, and communities that have historically relied on their operation.

Although the benefits of the low-carbon transition will far outweigh the costs, the structural change implied by the change will need to be managed to ensure new benefits created are inclusive. As the global economy transitions from high-carbon assets to low-carbon alternatives due to market forces or regulatory interventions, workers and communities that rely on these assets must be supported, in what has been coined a “just transition.” This will require a strong, coordinated action among governments, communities, investors, and businesses