Wrestle with PESTLE: race to net zero

This LCN Says is part of LawCareers.Net’s ‘Wrestle with PESTLE (WWP)’ series, which looks at various business case studies using the PESTLE technique. 

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PESTLE stands for: 

• political; 
• economic; 
• sociological; 
• technological; 
• legal; and
• environmental. 

This technique involves using these six external factors to analyse the impact on a business and/or industry. 

Case study: the race to net zero

‘Net zero’ refers to a state in which the greenhouse gases going into the atmosphere are balanced by removal out of the atmosphere. 

The Paris Agreement was adopted in 2015 by 196 countries and all but three have since ratified it.  The Paris Agreement underlines the need for net zero. It requires states to “achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”.

The agreement's goal is to limit the rise in mean global temperature to "well-below" 2°C above pre-industrial levels, and try to limit it to 1.5°C, to reduce the effects of climate change.

Following the introduction of the Paris Agreement, the Intergovernmental Panel on Climate Change (a body of the United Nations responsible for advancing understanding of climate change) released a report in October 2018 on the 1.5°C target. The panel concluded, with high confidence, that the achievement of net-zero emissions of CO2 and a reduction in net non-CO2 radiative forcing would halt human-caused climate change in the long term. 

Political

While almost every country in the world has ratified the Paris Agreement, the first ‘Global Stocktake’ (an evaluation process of the Paris Agreement, which considers states' policies, scientific findings and inputs from non-governmental organisations (NGOs) determined that the world isn’t on track to meet the long-term goals of the Paris Agreement.

One of the reasons for the lacklustre results is the lack of political will to pursue the goals of the agreement. The race towards net zero will inevitably require a decrease in the amount of CO2 released into the atmosphere – necessitating vast investments in things like renewable sources of energy or the development of less environmentally harmful production methods. This requires a significant transformation of many economies. 

There have been accusations of corporate lobbying efforts to stall the transition to net zero.

There’s also no consensus among voters as to the correct approach to the climate crisis and many fear the economic consequences of the introduction of low-carbon policies.

At the same time, politicians face increased pressure from environmental activists to commit to ambitious goals to reduce emissions. The actions of organisations such as Just Stop Oil or Extinction Rebellion strive to highlight the inadequate response of governments to the climate crisis, and the increasingly disruptive forms of protests are meant to force states to commit to science-based, verifiable and binding actions.

As world leaders face these two opposed forces, environmental concerns are becoming a key political factor in many jurisdictions.

Economic

The transition to net zero will require an enormous investment into green energy, new technologies and the necessary infrastructure.

There are challenges: while estimates vary, it’s estimated that yearly funding of as much as $3 trillion would be required to meet the 2050 target – a significant sum that will be difficult to meet.

Such a significant economic transition will require people to develop skills in new sectors, while some sectors may become redundant. 

At the same time, there are plenty of opportunities for states, companies and individuals around transition, if the world focuses on achieving net zero. This could be due, for example, to top-down regulation forcing companies to decrease their emissions, or bottom-up pressure exerted by society and changing investment patterns. Many countries and companies are now being quick to develop the necessary infrastructure, pipelines of talent and production capabilities, for example, to be able to capitalise on a rapidly growing market; and investments in the low carbon space can yield significant returns.

Social

The approach to net zero is a polarising issue in many societies. On the one hand, environmental activists are employing more and more disruptive methods of protest to force a more ambitious approach to combating, what they perceive as, an existential threat to humanity. On the other hand, many worry that the transition to net zero could decrease standards of living, lead to higher bills or even give rise to loss of employment.

The response of the UK government to the protests organised by ecological organisations is also worth noting. For example, Priti Patel, when she was home secretary, urged the police to take “decisive action” against “selfish” climate change activists.

What do the experts say about a failure to achieve net zero and the likely resulting increase of the world temperature above 2°C?  The World Health Organisation estimates that between 2030 and 2050, climate change is expected to cause approximately 250,000 additional deaths a year. Certain areas of the earth, such as low-level island nations and land around the equator may become uninhabitable due to the increased sea levels and increases in average temperatures; and more frequent and extreme natural disasters and weather patterns could arise. This could result in unprecedented waves of climate migration and refugees.

Technological

It’s recognised that some emissions are inevitable – either due to the very nature of specific activities or because of technological limitations.

As a result, many are focused on a process called carbon capture usage and storage (CCUS). There are multiple proposed means of achieving this, including capturing CO2 released while producing energy that results from industrial processes.

Direct air capture (DAC) technologies, which extract CO2 directly from the atmosphere, are also being investigated. At the same time, further improvements to existing and new low-emission technologies – such as electric vehicles, renewable energy, and batteries – are likely to make the pursuit of net zero cheaper and faster.

Improvements in other areas can also give rise to significant emissions reductions, for example, improvements to insulation of buildings, changes to farming practices or reducing the carbon impact of transport.

Legal

The Paris Agreement relies on individual states to implement their commitments, instead of providing a detailed compliance mechanism where they fail to do so.

However, this doesn’t mean that there are no legal consequences in respect of perceived failures to take climate action. NGOs, such as ClientEarth and Friends of the Earth, have successfully used the legal system to force governments and companies to strengthen their response to the climate crisis.

Many countries have also introduced national laws to implement net-zero targets; the UK legislated its own target into law in the Climate Change Act 2008. It can be expected that governments and legislatures will be more inclined to impose legal obligations on private and state actors as the 2050 deadline nears. For example, many UK companies are now obliged to report on their emissions and energy use; the Competition and Markets Authority and the EU have both introduced guidelines allowing business to cooperate on climate-related issues while staying compliant with competition law; and the Energy Act gives Ofgem (the energy sector regulator) a legal mandate to consider how its decisions may assist the secretary of state in meeting the government’s net-zero target, while protecting the interests of existing and future consumers.

Environmental

Some are opposed to the idea of ‘net’ zero for several reasons. One reason they give, is that it distracts from the priority to make absolute emissions reductions.

Many have argued for the importance of market-based measures using carbon ‘offset’ projects to reduce emissions. However, forestry projects, in particular, have been the subject to significant criticism over the past year in the face of investigations into their environmental integrity. 

Additionally, a net-zero target focuses solely on emissions. Some argue that as a concept it overlooks other negative impacts of human activity on the environment such as:

• the destruction of ecosystems;
• waste production;
• animal extinction; and
• water pollution.

The verdict

The concept of net zero will remain a hot topic for the foreseeable future; especially as the effects of manmade climate change become increasingly pronounced. The pursuit of net zero will have a wide range of impacts; and there remain many stakeholders with opposing views. The shift to net-zero emissions will be a significant one, requiring huge investments and political will. Its effects will be wide-ranging, whether or not we meet the target.

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Aleksander Larski (he/him) is a trainee solicitor at Mayer Brown International LLP.