As the COVID-19 pandemic spread around the globe earlier this year, Mark Carney admits he was worried it would simply be 2008 all over again—when, in the rush to secure companies’ survival, progress on climate change essentially got left behind.
“When this began, I wondered that exact question,” he says. “Would there be a repeat?”
Instead, momentum seems to have only grown.
Carney, now the UN’s special envoy on climate action and finance and an adviser to the British government, stepped down in March after nearly seven years as the governor of the Bank of England. Before that, he had been governor of the Bank of Canada, which he had led through the last financial crisis.
“I became a G7 central banker in crisis, the global financial crisis, and I left in crisis,” Carney said Tuesday, speaking at Fortune’s Global Forum, by video link from quarantine at his home in London.
Indeed, in March, he had warned that for governments, battling COVID-19 would require winning a war—while addressing climate change would be “winning the peace.” It wouldn’t be easy, he said.
“Because the costs of fighting the pandemic will diminish the capacity of governments, businesses, and financial institutions to tackle the next crisis—and we should acknowledge that,” Carney said.
Despite such concerns, commitments to cutting carbon emissions to net zero, largely by 2050, have in fact grown, from both countries and companies, including legacy oil and gas giants like BP and Shell. Last week, Japan said it would target net zero by 2050, and in September China, the world’s largest emitter, said it would target net zero by 2060. The EU, a forerunner on climate policy, has pledged to make the bloc’s economic recovery “green.”
Unlike in 2008, “the shift is there,” says Carney.
“One of the things is we’re 10 years more into the climate challenge, the climate crisis. So time is that much shorter,” he said. “There’s a much broader understanding I think in society, including in the younger generation, of the scale of the issue and the dynamics of the issue.”
The pandemic has also brought home some of the risks of not paying attention to the environment, he said.
“It’s not a perfect parallel with what’s happening with COVID—but obviously we had undervalued resilience,” he said. “Obviously, listening to scientists sometimes makes sense,” he added, tongue in cheek.
The former central banker also pointed out that the economics behind a transition to a low-carbon economy have changed, and that while not all the economical technology is in place for net-zero emissions yet, “we can get a long way,” with what exists now. “I’m confident that the market will figure out ways to finish this off.”
One example is that although a carbon tax is not in place worldwide, clear demands from the public and government have created a “shadow price” on carbon in the market, Carney said, which is now built into carbon-intensive projects. He said that that tax ranged from $40 to $80 a ton—often far higher than legally mandated carbon prices. (In Canada, for example, the government passed a law that established a carbon tax of $20 a ton in 2019, and rises $10 per ton every year to 2022.)
Carney also flagged some of the medium- and long-term risks for economic recovery as the world struggles with new waves of infections, adding that trends toward de-globalization, and geopolitical tension, have accelerated amid the crisis.
“That could be exacerbated by what happens over the course of the next 18 months as a number of countries are facing bigger difficulties in terms of their debt burdens and their growth, and how does the system—or lack of system—address that,” Carney says.
A significant factor is whether households and individuals are “scarred” by “the experience of realizing that they didn’t have much of a cushion going into this, in terms of a financial cushion, and potentially a cushion in terms of access to basic necessities, including health care.”
Those long-term factors are going to vary hugely, Carney warned.
“Some countries have dealt with this better than others.”