How Countries Can Become Leaders in Net-Zero Technologies

The recently released Sixth Assessment Report from the Intergovernmental Panel on Climate Change (IPCC) warns that global surface temperatures will continue to rise until at least mid-century under even the strictest emissions reduction scenarios. After that, what happens depends on the actions we take now. Without deep reductions in emissions of carbon dioxide (CO2) and other greenhouse gasses in the coming decades, the IPCC predicts that global warming will exceed 2°C during the 21st century. Such a rapid, steep rise in temperatures would be devastating for natural ecosystems and human societies.

That’s why observers hope that the national representatives attending COP26, the 2021 edition of the United Nations Climate Change Conference, will set ambitious targets for emissions reductions to ensure the world can reach net-zero emissions by 2050 and ideally limit global warming to 1.5°C.

While many governments understand that investing in climate innovation is a moral and ecological imperative, they may not realize that such investments also can be a catalyst for growth and prosperity. While the private sector has a major role to play in developing and commercializing cleantech innovations, BCG believes that government support for climate solution innovation is vital to boosting economic growth and developing new high-paying jobs.

Consider how China became the foremost producer of photovoltaic cells and how South Korea has captured leading market share in lithium-ion batteries. The governments of China and South Korea strategically used subsidies and investments to drive technological breakthroughs and drive down costs, encouraging mass adoption of these technologies. As a result, the whole world has benefitted from more affordable solar power and electric vehicles, while Chinese and South Korean companies have emerged as global leaders in these growth sectors.

To reach net-zero greenhouse gas emissions by mid-century, the world will need further adoption of proven technologies such as EVs, solar panels, and wind turbines. These technologies have already reached economies of scale that make them relatively cost-competitive with conventional carbon-emitting technologies.

We will also need another wave of innovation around technologies such as carbon capture utilization and storage (CCUS) and green hydrogen that are still too expensive to be deployed at scale. These emerging technologies present exciting opportunities, not only for the climate, but also for countries seeking new sources of competitive advantage—someone will have to supply global markets with electrolysers to produce the green hydrogen and DAC (direct air capture) technology to pull CO2 from the atmosphere.

The private sector is starting to dip its toes into these sorts of green technologies, but only governments have sufficient resources to create the huge push needed to drive progress at the pace that experts say is needed to limit climate change. Governments have multiple avenues through which to promote change. They can issue mandates, provide subsidies, reorient their own procurement policies around chosen innovations, or make clean technologies more cost-competitive by imposing a price on carbon.

Whichever path they choose, those governments that adopt a well-defined mission-driven approach to climate investment have a better chance of achieving their own pledges to reduce emissions while positioning their economies to thrive in a net-zero future.