The Cost of Inaction 2024

Governments need to accelerate the transition to prevent the most extreme consequences of unchecked warming The World Economic Forum and BCG’s January 2024 report Bold Measures to Close the Climate Action Gap: A Call for Systemic Change by Governments and Corporations outlined five key actions that governments should take to drive bolder, systemic change.66 These still hold today: 1. Close the 600+ gigaton ambition gap by strengthening Nationally Determined Contributions (NDCs) in the upcoming submission round, multiplying climate finance for low- and middle-income countries and refocusing global negotiations. 2. Expand the use of carbon pricing by tracking emissions more fully, broadening the global scope of pricing and rolling out mechanisms to level the playing field for low-carbon solutions. In parallel, governments need to establish a credible, transparent and high- integrity framework for carbon credit markets to ensure credible emission reductions and prevent misuse. 3. Double financing and incentives for outsized- impact solutions. More subsidies and green public procurement are the push needed for clean hydrogen, battery storage, carbon capture and storage and other early-stage technologies to grow into cost-competitive solutions. 4. Remove transition obstacles to deliver on COP28 pledges to accelerate electrification at least threefold by fast-tracking green projects, de-risking key supply chains, updating government procurement practices, upskilling the workforce and getting civil societies on board. 5. Prepare for more drastic transition measures, which may become necessary and economically justified in an ever-warming world. At the same time, governments need to prepare for a changing climate As it stands, humanity will likely overshoot its emission budget for keeping warming under 1.5°C – and probably even 2°C.67 This means all countries need to prepare for a future with a lot more extremes, including the following: –Develop National Adaptation Plans (NAPs) to protect citizens, economies, nature and biodiversity. NAPs serve as an essential tool to guide adaptation and resilience efforts, enabling both public and private sectors to assess and invest in adaptation and resilience solutions. –Concentrate capital on high-impact adaptation projects. Since a rapid closure of the adaptation finance gap looks unlikely, current available funding needs to be redirected towards adaptation and resilience initiatives that maximize the return on investment. –Increase public-private collaboration to scale up adaptation and resilience efforts. In public-private partnerships, the private sector can participate in multiple facets of a project, offering financial support through grants and loans, capability support by providing in-house expertise and execution support by co-owning delivery of the project. The urgency for both corporates and governments to act, in their own interest, cannot be overstated This report has focused on the corporate cost of climate inaction and offered a CEO Guidebook to Managing Climate Risks and pursuing opportunities in a highly uncertain world. The decisions made today will shape the economic and environmental landscape for generations to come. Governments must act urgently to accelerate the transition, scaling- up financing, expanding carbon pricing and preparing for a future shaped by more extreme climate impacts. 50 The Cost of Inaction: A CEO Guide to Navigating Climate Risk