Preview to COP29: An urgent call to accelerate decarbonization

November 1, 2024Climate Week in New York City drew more than 100,000 leaders from the private sector, the public sector, NGOs, and experts from around the world. The meeting was the largest to date and featured 900 events, with McKinsey Sustainability playing a prominent role, hosting more than 20 gatherings.

The key topics that were covered offer a preview of discussions that will continue at COP29 this November in Baku, Azerbaijan.

'The driving force for everything we do is time'

Under the shadow of increasingly frequent extreme weather events, economic uncertainty, and uneven decarbonization progress, the unifying theme was the need to accelerate climate action.

"When we talk about climate action, one variable which we cannot control, but is a driving force for everything we do, is time," said Senior Partner Mark Patel, coleader of the firm's Platform for Climate Technology. "We face the challenge of trying to make a transition in time. And while we can't change time, there are other variables we can check, like scale, cost, and speed." He noted that a dozen technologies could deliver 90 percent of the CO2 abatement needed to meet the world's 2050 decarbonization goals.

"We need to move a lot faster to decarbonize and to scale the climate technologies that drive it," Patel said. This will lower costs and make the technology more commercially viable, ultimately leading to wider adoption. And it can also boost the development of others, much like what happened with electric vehicles and batteries. While scaling is a monumental undertaking, many attendees were left with the message that it is possible.

Three lessons in scaling green tech

A separate three-day event gathered leaders and Climate Pledge signatories who brainstormed aboutthe topics that are driving climate action. Panelists and McKinsey experts including Senior Partner Rob Bland highlighted lessons in scaling clean technologies: businesses need to invest capital across cycles; green products need to function better overall than the conventional alternatives; and collaborations need to focus narrowly on a few key issues. Good storytelling about successes can also help.

Leaders also discussed how artificial intelligence and cloud computing are changing the landscape. According to McKinsey research, cloud-powered AI could accelerate nearly half of 1,200 decarbonization initiatives analyzed across 20 sectors. Real-world examples included using a digital twin to prioritize the fleet vehicles to replace with electric vehicles and using machine learning to help optimize EV charging networks. At the same time, leaders discussed how surging adoption of digitalization and AI technologies has amplified the demand for data centers and power across the United States.

Investing for adaptation and resilience

Hand-in-hand with decarbonization, it will also be critical to assess exposure to physical climate risks and prioritize climate adaptation and resilience where needed. Partners Alexis Trittipo and Mekala Krishnan, along with investors and leaders from the public and private sectors, discussed how to effectively implement adaptation solutions and the mobilization of resources to date. Some panelists described this as being "woefully" short. The discussions explored ways of spurring investment, including an integrated investment platform offering opportunities, integrating climate risks into traditional investment decisions, and utilizing a range of financial instruments, including project finance, venture funding, and beyond for adaptation.

On the agenda for COP29

The theme of climate financing will dominate the discussions at COP 29, where McKinsey experts will host a series of in-person and virtual events featuring business, government, and NGO leaders. Representatives will seek to define a new global climate finance goal to support developing countries in their climate actions post-2025.

Climate financing is critical because the net-zero transition is expected to involve large amounts of capital investments. McKinsey estimates suggest that about $9.2 trillion per year would need to be spent on both high- and low-emissions technologies over the next three decades, a sharp increase from the $5.7 trillion allocated today. More importantly, this would be reallocated from about 75 percent spent today on high-emissions assets and 25 percent on low-emissions assets, to the exact opposite on average going forward.

Other key themes will include the need to hyper-scale green businesses and practical insights on adapting to climate risks and building resilience. Mekala said she hoped the conversations that began during Climate Week would continue at COP, particularly those on adaptation. She pointed out: "We were not just talking about decarbonization, but also how we build resilient societies and economies and I hope that continues."

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