We must address the urgent reality of climate change and its dire consequences in 2050. If humanity does not achieve carbon neutrality, one-third of humanity will be living in too hot and inundated areas by then. Therefore, reaching carbon neutrality in 2050 is a goal and a necessity. Significant investments will be required to drastically reduce the use of fossil fuels and substantially increase carbon capture. This transition is crucial for our future and should be a top priority for all of us.
SCALING UP INVESTMENTS FOR SUSTAINABLE TRANSITION
According to a UN High-Level Climate Action Champions report, confirmed by many other sources, the total world investment needed for this transition is around 130 trillion dollars, requiring an annual investment of 3500 billion dollars, representing 1.3% of the world’s GDP. The investment will be allocated roughly as follows: 50% for green electricity distribution networks and energy storage, 15% for renovating housing and heating, 5% for decarbonizing industry, and 10% for green mobility, including planes, shipping, and battery infrastructure. Additionally, 4% for carbon capture, 2% for hydrogen, 2% for low emissions fuels, and 5% for agriculture, forestry, and other land use.
The total investment in the transition is only one-third of what is needed. To keep up, we must double the investment before 2035 and quadruple it before 2040. These investments can be financed 70% by private finance, with nearly half funded directly through corporate balance sheets. They could also be economically sound, with 70%- 80% of technologies estimated to have higher Net Present Value than high-carbon alternatives by 2030.
The majority of these investments must be located in Asia Pacific (43%), North America (18%), Africa (5%), Central and South America (5%), the Middle East (4%), and Eurasia (3%).
CRITICAL INVESTMENTS FOR FUTURE GENERATIONS
However, reaching carbon neutrality isn’t the only investment needed. We also need the next generation to be healthy, well-educated, and have access to healthy food. To reach that, enormous investments are badly needed in urban, health, education, and social support infrastructure in countries with booming populations, as well as financing for pensions in countries with aging populations. They will represent, as a whole, another 3,500 billion dollars per year.
Suppose we don’t make these investments as we do those needed to preserve the climate. In that case, billions of illiterate, hungry, and unhealthy people will try to survive in a world with a livable climate. This is not a promising future.
Therefore, we must make a clear distinction between the sectors that are useful for the future ( such as sustainable energy, health, education, sustainable agriculture, healthy food, water, carbon capture, recycling, defense, and security ) which form the “economy of life,” and those that form the “economy of death,” such as fossil fuels, artificial sugar, nitrogens, and all related industries.
Today, the “economy of death” represents more than 50% of global GDP, and this is roughly the same in all countries.
Our aim should be to transition, before 2030, to a world economy where the economy of life accounts for more than two-thirds of the total, which will mean shifting around 4% of the world GDP every year towards the economy of life sectors. That is not impossible. That requests vision and planning.
This is a formidable challenge but also a huge opportunity. Nations that lead the way in this transition will lead the world in 2050.
THE CRUCIAL ROLE OF TREES
In times of phenomenal human induced technological advances, it’s almost awkward to realize that the greatest machines ever built to sequester carbon, produce rainfall and nourishes biodiversity are trees. Collectively, in the form of majestic tropical forests they hold the key to support our own existence in this planet.
IMPACT OF DEFORESTATION
Trees have an intrinsic relationship with economic and social development of humanity. Deforestation has advanced proportionally as civilization evolved, whether for use in construction, as fuel or for the conversion of soil to allow agricultural expansion. As a result, many areas of the Global North that were previously heavily forested have been significantly reduced, leading to the loss of biodiversity and severe changes in ecosystems. As a result, our planet’s significantly important forest remnants are in the Global South: The Amazon Rainforest, the forests of Central Africa, as well as the forests of Southeast Asia, the Tropical forests of the world.
The United Nations Framework Convention on Climate Change (UNFCC) points out that tropical forests maintain around of 15 to 20 years of global CO2 emissions in their biomass, and actively absorbs carbon dioxide from the atmosphere second after second . But Forests are far from being just Carbon sucking and storage machines. They are living entities maintaining more than 30% of terrestrial biodiversity with who knows how many species still to be identified.
Tropical forests are also responsible for regulating much of the global rainfall regime. Data from the National Amazon Research Institute (Inpa) indicate that 20 trillion liters of water are evapotranspired by Amazonian trees every day. To give you an idea, the volume dumped into the Atlantic Ocean by the Amazon River is over 17 billion tons daily. All this water produced and recycled by the Amazon Forest is responsible for about half of the agricultural production in South America enabling this region to export food and fibers to most regions in the world.
However, we are failing tremendously to protect and restore forest ecosystems. The tropics are losing over 10 million hectares of trees every year for the past 30 years, resulting in yearly emissions of 2.5 Gt of carbon dioxide, equivalent to India’s annual fossil fuel emissions. This self-destruction is a result of our incapacity to attribute economic value to forests vital ecosystem services. Deforestation still means immediate and significant financial gains for those who exploit these resources as it was in the 18th century, and in many cases occur illegally and over indigenous peoples’ rights.
URGENT NEED FOR ECONOMIC INCENTIVES
Legislation and command and control actions alone are not enough to stop deforestation. As an example, Brazil has one of the most robust Forestry Laws in the world, being cited as a legislation example for other nations, however, challenges such as the lack of effective implementation, budgetary limitation, and the lack of economic alternatives for local populations prevent reducing deforestation. It is crucial then to complement these measures with economic incentives for conservation and restoration providing viable sustainable alternatives for communities dependent on forestry exploitation.
Therefore, we urgently need to expand investments towards Nature Based Solutions, defined by International Union for Conservation of Nature (IUCN) as actions to address societal challenges through the protection, sustainable management and restoration of ecosystems, benefiting both biodiversity and human well-being.
HARNESSING VOLUNTARY CARBON MARKETS
After 20 years working to link finance and conservation, I see Voluntary Carbon Markets (VCM) as the best tool to consistently channel resources from the Global North and the Private sector to developing countries enhancing their ability to protect and restore forests ecosystems. A recent statement by the United States Treasury Department, as well as SBTi’s recognition of the importance of private investments in reducing greenhouse gases beyond business chains go in that direction.
Investing in projects and programs of REDD+ changes the incentives for deforestation, by generating economical value for the conservation actions developed by local companies and indigenous communities. Protecting the remaining forest ecosystems must be financed by companies willing to reach their Net Zero goals
CRITICAL INVESTMENTS IN ARR
We are now in a situation where only protecting what remained as forests is not enough. We need to bring back what already been had been lost. Investments in the Afforestation, Reforestation, and Revegetation (ARR) are picking up worldwide as its clear that this process remove, protect and shelter fragile areas from floods caused by abnormally storms and sea level rise. It’s both a mitigation and an adaptation investment that employs hundreds of thousands of people in done in the necessary scale.
NATURE-BASED SOLUTIONS
As an example, we at Biofílica Ambipar developed an ARR project called “Corredors for Life”, which aims to create ecological corridors through the restoration of natural vegetation in Brazil’s Atlantic forests, promoting connectivity of remaining fragments transforming these places into sanctuaries for the maintenance of local biodiversity. This project alone has the potential to sequester 30 million tons of CO2 equivalent in the next 35 years.
As a global society, we are extremely behind in reaching the carbon emissions reduction targets related to the Paris Agreement, both in terms of the private sector and nations. Carbon markets are not silver bullets that will save the planet, but it is certainly one of the most important financial tools currently available to help with this goal. Using it to fund high integrity Nature Based Solutions investments is crucial to protect our forests and ourselves.
A NEW AGE OF GLOBALIZATION
Technology is the main driver of long-term change. In a recent book, The Ages of Globalization, I described how a series of fundamental breakthroughs in technology have ushered in new ages of globalization, each with its own living standards, inequalities, power relations, population dynamics, and geopolitics. The world has entered a new age of globalization with the digital technologies of computation, connectivity, and artificial intelligence. An urgent goal of economic science today is to understand how AI will reshape society, and how our economic and political institutions should adapt to reap the greatest benefits of the new technologies.
In my studies, I have identified seven major ages of globalization. The first was built on the discoveries of fire, language, and tools, roughly 50-300 thousand years ago, which gave rise to modern humans (Homo sapiens). The second followed the discovery of agriculture roughly 10,000 years ago, which converted humanity from hunter-gatherers to farmers settled in village. The third was the domestication of horses roughly 5,000 years ago, which gave rise to the first empires. The fourth was the invention of alphabetic writing systems and books, roughly 3,000 years ago, which gave rise to an explosive growth of knowledge-based societies and the birth of philosophy. The fifth was the breakthrough to trans-oceanic navigation roughly 600 years ago, that gave rise to first truly global empires (Portugal and Spain, followed by Holland, Britain, France, and others). The sixth was the large-scale harnessing of fossil fuels with the invention and improvement of the coal-powered steam engine around 250 years ago, which ushered in the age of industrialization, first in Britain and then gradually throughout the world. The seventh began in the 1930s with the theories of computation of Alan Turing and John von Neumann, followed by the electronic computers in the 1940s, transistor-based logic circuits in the 1950s, microprocessors in the 1960s, the Internet in the 1970s, artificial intelligence from the 1950s till today, and many other digital breakthroughs.
BREAKTHROUGHS AND INNOVATION
To understand what might happen to the global economy and society in the digital age, let’s consider briefly the manifest changes ushered in by the modern steam engine in Britain roughly 250 years ago. The steam engine gave rise to a massive upscaling of industrial production in Britain (textiles, steel, others), new forms of transport (notably the railroad and ocean steamer), a massive increase in Britain’s military power, rapid urbanization (around new factory towns), and conquests of the British Empire. Steam power, we can say, made Britain the hegemonic power of the 19th century. And of course, the impetus of Britain’s industrial economy led to a cascade of further technological breakthroughs in the 19th century throughout Europe and North America, including telegraphy, telephony, electrification, the internal combustion engine, industrial chemistry, the automobile, radio, and far more.
Crucially, the steam engine changed how we live (giving rise to rapid urbanization), average levels of income (rising during the 19th century), new forms of inequality (for example as manual spinners and weavers lost their job to the spinning jenny and power loom), and new forms of global power, nothing less than a world ruled by Britain from around 1850 to 1914. The entire life cycle changed dramatically in the course of the 19th century in Europe and the US, with more schooling, fewer working hours, the invention of new forms of leisure, and even the advent of “retirement” for the lucky small portion of urban society who survived into their sixties. Gender roles also began to change, as women entered the hired workforce with new jobs for women in industry, teaching, social work, and other urban activities.
This brings us to the digital age, and notably to artificial intelligence. We are already witnessing very large changes brought about by the digital age in general, including computation, connectivity, robotics, and AI. Industrial robots have already replaced millions of jobs in industry and reduced the wages of blue-collar industrial jobs relative to white-collar professional jobs (finance, healthcare, education, public administration, management, and so forth). Good jobs already require more schooling, in what has been called a race between technology and education. A high-school education was once the ticket to the middle class. No longer. Now a tertiary education of some kind is needed, or at least an advanced skill-set (such as computer coding or other STEM skills).
AI AND FUTURE OF WORK
Digital connectivity has of course also fundamentally changed how we live and work. The empty office space throughout Manhattan testifies to the new work-from-anywhere principles of virtual offices, online conferences, cloud computing, e-books, online entertainment, and all of the other digital changes that make physical presence unnecessary for countless kinds of work and leisure. This is turn is reshaping where people live, whether or not they commute, and of course the kind of jobs they accept and seek.
The recent breakthroughs in AI, including those of the past decade in deep neural networks that solve specific complex challenges (chess and go, protein folding, facial recognition, self-driving vehicles), and the more recent breakthroughs in large-language models such as ChatGPT, will accelerate disruptions in the labor market and substantially reshape the distribution of labor-market earnings. Millions of workers will surely lose their jobs entirely. Others will see their efficiency and earnings bolstered by AI. A large part of the workforce will have to re-tool as their jobs are reshaped to harness the potential of the new technologies.
The implications for the gap between rich and poor countries are also complex, and are still not understood. Poor countries will reap tremendous benefits from AI-empowered healthcare, education, public administration, and management of infrastructure. Skilled workers in poorer countries will be able to maintain global careers from their home locations, without the need to migrate as in the past. But there will be adverse effects as well. The long-proved pathway to development through labor-intensive manufactured exports is no more. The AI-empowered robots have taken the jobs.
ANTICIPATING AI REVOLUTION
Public policy will have to go into overdrive in the coming years as the AI revolution sweeps across all parts of the world. First, in every country, studies will be needed to understand – and anticipate – the changes ahead given global trends in technological advances and adoption patterns. Second, new forms of education and training will urgently be needed by workers across the economy. Third, new forms of “pre-distribution” (public services that empower the poor in the new AI-driven economy) and fiscal redistribution (transfer payments to those hit hard by job losses or cuts in earnings) will be needed. And to pay for all of this, new forms of public finance will also be required. Big Tech, and its founders and owners, have become fabulously rich, indeed unimaginably so. A key question that lies ahead is the best forms of taxation of the digital economy in order to finance the public investments, public services, and transfer payments in the new digital economy.
The new Task Force on Macroeconomics, Poverty and Inequity of the Columbia University Initiative on AI and the Future of Work will address these deeply fascinating, utterly novel, and vital challenges. We know that huge changes in society lie ahead. It’s not good enough for us to sit back and watch the show. We need to shape the changes ahead so that AI fulfills its vast potential to raise living standards and wellbeing, not for a few, but for all parts of society and all regions of the world.
ADDRESSING CLIMATE CHALLENGES
The devastating impacts of climate change are becoming increasingly evident around the globe, from extreme weather events to rising sea levels. The urgency of finding effective and innovative solutions has never been more pressing as communities face immediate consequences. We’ve seen the transformative impact of new technologies in driving economic growth, as well as societal and environmental progress. The current situation makes it paramount for venture capitalists and their partners to take swift and decisive action by embracing collaboration with diverse stakeholders. By identifying and funding innovative startups, together we can develop technologies and solutions that address these challenges and safeguard our future.
ADDRESSING CLIMATE CHALLENGES
Particularly in emerging markets, investing in climate resilience is critical, as these regions often bear the brunt of climate impacts yet have fewer resources to adapt. Adequate
funding is the lifeblood of climate resilience efforts, and a holistic approach is required. This includes targeted investments and entrepreneurial support across sectors such as agritech, fintech, insurance, healthtech, and foodtech. This presents both opportunities for growth and solutions to core challenges while prioritizing inclusivity and innovation. This approach provides capital to stimulate innovation and drive meaningful impact at scale, ensuring that no country is left behind in the transition to a sustainable future. But we must properly structure the development of startup ecosystems to support growth and de-risk investments in new technologies over time.
BUILDING IMPACTFUL INNOVATION HUBS
Emerging markets can become innovation hubs that support climate resilience through structured education, connectivity to new markets, and introductions to potential strategic partners. From our fourteen years of global VC experience, leveraging a local presence in 20+ countries and backing more than 2,900 companies operating in 80+ countries, including multiple emerging markets, we’ve seen the success of public-private partnerships. Supporting startups and investors with business-friendly policies, investing in infrastructure like incubators and accelerators, and providing education and training in both tech and investor skills all contribute to fostering a culture of innovation.
PUBLIC-PRIVATE PARTNERSHIPS TO POWER STARTUPS AND INNOVATION
Startups play a critical role in developing innovative solutions to hard problems. From our decade of experience at the heart of startup ecosystems, we have seen startups’ willingness to take large risks for outsized growth, leading to significant improvements for both economies and societies. But it takes an ecosystem of stakeholders to create a thriving and sustainable startup environment. Governments, venture capitalists, entrepreneurs, mentors, state-backed agencies, and funds all have vital roles to play.
Coordinated efforts, such as those supported by the FII Institute like bringing these stakeholders together during the Climate Resilience Conclave during FII Priority Rio, provide an important platform for these groups to embrace an interconnected strategy. This can accelerate entrepreneurship and ensure targeted initiatives optimize startup performance and create a venture-friendly environment. Governments and DFIs should also recognize their pivotal role in catalyzing startup ecosystems by laying a strong policy foundation that incentivizes engagement across stakeholders. Additionally, they can provide the catalytic capital needed to increase their impact on these critical issues, bridging funding gaps for higher-risk startups and attracting private capital.
The time is ripe to harness the momentum generated by these initiatives and create a perfect storm of acceleration for the future we urgently need. By fostering collaboration and innovation, we can build a more resilient and sustainable world for generations to come. Inclusivity and empowerment are key, ensuring that the benefits of sustainable development reach those who need them most, creating a more equitable and just society for all.