AusCham 2022

So much of change is actually not technical, but rather social. In overcoming the inertia that is the status quo, we need to confront the tricky psychology of each transition that may drive the change and expectations to cause a tipping point.

Instead of adhering to the political school of thought that argues that “urgent pessimism” prompts action, the Nobel Laureate Paul Romer (2018) suggests that conditional optimism and a future-focused sense of agency is a much more effective way of encouraging climate action and providing the leadership needed across all spheres of society. More on conditional optimism v complacent optimism here.

Let me give you an example of that. We’ve seen throughout the world that there’s been a
change in the political environment and that change has made it easier to deploy some of
the new low carbon technologies. But that change in the political environment itself has
come about because the cost of new technologies have come down. But the cost of new
technologies coming down is a function of how much we deploy them
. And this is the
genesis, if you like, of some of these reinforcing feedback mechanisms that breed these
tipping sets.

Expectations at the individual and the collective level turn out to be crucial in prompting collaboration and coordinated action. We’ve seen that threats and risks and moral imperatives – burden-sharing, doing the right thing for the planet – on their own haven’t been sufficient to drive change, but we do understand that if the payoff to any individual, any business, any politician, of investing in low carbon technologies and process is a function of how many others do so, then the expectation that everybody’s going to invest in low carbon technologies actually can become a self-fulfilling prophecy.
So, what is your role in this change in expectations? What role do you have within your
businesses and as an individual? To lead others and to persuade others that collaborating towards a mutually beneficial goal is in their interest, so that we can overcome the stumbling blocks and the barriers that have prevented us from taking the action necessary and got us stuck in the inertia of this very damaging and very unproductive business as usual model – that’s what this module is going to look at.
So, I’d like you to think critically now about why partnership is so important. And I’d like you to reflect on your own spheres of influence. So, you can think about why collaboration, partnership and influence within your organisation and within your network of peers is so important to help you and your organisation to transition effectively and productively to the net zero economy.

This set of notes outlines some of the barriers to the net zero transition and considers the importance of human psychology in our deep-rooted reluctance to change. On the other hand, it explores how our expectations of the future can change mindsets, influence behaviour and overcome barriers to the transition. We will also consider what role individual businesses can play in shaping expectations and driving change.

While these arguments may reflect valid concerns, they fail to acknowledge the systemic nature of the required changes, as well as progress already made.  The challenges that need to be overcome also include institutional, political and psychological barriers (Zenghelis, 2019a). It is, therefore, important to unpack some of these barriers to change in order to better understand and address them. investments are often perceived as expensive, with limited profitability and high risk. May well be the most cost-effective and profitable approach in the long term as early investment ensures greater adoption.

n the hard-to-abate sectors, such as heavy industry, shipping and aviation, further technological innovation is still needed to reduce emissions to net zero. For example, in steel manufacturing, the contamination of primary materials prevents large-scale recycling of materials, and no viable alternatives currently exist (ETC, 2020). Additional investment is also needed into negative emissions technologies (NETs) that have the potential to capture carbon from the atmosphere and either store it or re-use it. While many of these technologies currently exist, they have not yet been demonstrated at scale and may potentially have unintended consequences, such as damage to biodiversity (Falk et al., 2020). In developed countries, it has been suggested that a reduction of over 80% of greenhouse gas (GHG) emissions could be achieved using existing technologies, with the remaining reductions coming from a combination of new land use approaches and changes in consumer behaviour driven by policy interventions (Engel et al., 2020).

It also includes social change on an individual, organisational and societal level. These developments need to align with our expectations of the future, consider psychological barriers that may prevent businesses and governments from driving action.

Expectations have always been a key driver of the direction and extent of investment and innovation. For example, if a stock market crashes, while no physical assets (eg factories, land or materials) are destroyed, the financial value of these assets still diminishes as a result of changed expectations of the assets’ ability to generate future profit (Zenghelis, 2019b). As investment in these assets correspondingly declines, their profitability is likely to further decline, and expectations of the future can become the reality (Krugman, 1991).

In contrast, when based on a forward-looking perception of the future, expectations can become an enabler of change. This is particularly important in the context of the net zero transition, as the link between expectations and behaviour reflects on the speed of the transition. If businesses, investors and policymakers perceive that there are opportunities associated with innovation in technology, processes and institutions, this expectation can prompt sufficient action to reach the social tipping points described in earlier modules. These tipping point effects are particularly pronounced where new networks evolve to replace old networks, such as electricity replacing kerosene or cars replacing horse-drawn vehicles.

Additionally, expectations can drive policy changes and investments towards cleaner and more profitable and resilient resources and infrastructure (Zenghelis, 2019a). As such, the future cost of the net zero transition depends on current actions and expectations.

Pause and reflect:

It seems clear that there is a need to challenge and reframe perceptions of climate change to accelerate the net zero transition. In a video series produced by the University of California, Dr Sanjayan considers why policy makers and businesses have been slow to respond to climate change.

As you watch the video, reflect on alternative approaches to presenting information on climate change that could be used to motivate action. How can we reframe the issue of climate change to form a dialogue that drives action?