SERIES – The Net-Zero Transition in the Wake of the War in Ukraine: A Detour, a Derailment, or a Different Path? PART 5

In this series, we attempt to offer a more granular view of what might be in store. We examine the possible effects of the war and its ramifications on the key requirements for a more orderly net-zero transition. We explore the war’s potential effect on key sectors and how shifts in energy and finance markets could play out in the aggregate, both globally and within major regional blocs. Finally, we suggest steps that stakeholders could take as they navigate this turbulent period while continuing to drive toward as orderly a transition as possible. 

To get a clearer idea, visit PART 4 of the series, SERIES – The Net-Zero Transition in the Wake of the War in Ukraine: A Detour, a Derailment, or a Different Path? PART 4 – Earth5R.

Governance, institutions, and commitments could weaken at the international level but strengthen in regional and private spheres in the near term.

The success of governance, institutions, and commitments depends on three conditions: having the necessary standards, market mechanisms, and effective institutions in place; commitment by and collaboration among the public-, private- and social-sector leaders; and support from citizens and consumers. In the near term, the invasion of Ukraine could weaken all these requirements globally but also strengthen a subset of them in regional and private spheres.

The war could negatively affect international cooperation and jeopardize the creation of the international standards, agreements, and institutions that a more orderly transition requires. Furthermore, the introduction of competing priorities at all levels could deprioritize decarbonization and transition for decision-makers. For example, survey data support a short-term weakening of attention on climate across the public.

While a move toward increased national rivalries and the introduction of competing priorities could negatively affect international cooperation on many fronts, many major economies, including China, have entrenched incentives to continue to support global action on the net-zero transition, given their large and continued investment in producing green technologies and components. For example, China produces a third of global wind turbines, 70 percent of global solar photovoltaics, and is home to three-fourths of the world’s global capacity for lithium-ion battery manufacturing. Importantly, the commitment by and among private- and social-sector leaders could also be strengthened in response to diminished international cooperation. Most corporate and social-sector entities are multinational, benefit from coordination, and thus have incentives to maintain strong international ties.

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Source: McKinsey

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