Scenario 1: New morning

High innovation in green technology, high international cooperation on climate

Key dynamics:

Support for globalized responses to international challenges increases after the end of the coronavirus pandemic, and the international community—from consumers to multilateral organizations—takes sweeping steps to address the climate change challenge.
Economic growth recovers rapidly as COVID recedes early in the decade, soaring by 5.5 percent in 2021 and stabilizing at closer to 4 percent annually until 2025, which creates new avenues for progress on green technology innovation.
The climate outlook by the end of the decade is much improved. The energy mix is shifting more profoundly toward renewables, buoyed by policy that encourages their uptake; emissions begin tapering in many regions. Average annual global emissions growth equals 1.2 percent during the ten-year timeframe, below baseline projections of 1.3 percent.

In “New morning,” efforts to combat the global pandemic create the circumstances for more comprehensive international cooperation to address environmental degradation. A renewed appreciation for science, expertise, and international collaboration takes hold as the most important lesson learned from the trauma of COVID-19. Economic growth is generally strong, with a robust recovery taking place after the virus recedes early in the decade. Citizens demand collective government action to confront global challenges—climate change chief among them. Led by the United States and China, which are able to temper their past frictions, countries move to revitalize international institutions and empower them to lead development and implementation of collective climate response strategies. In this spirit of broader cooperation, cross-border flows of goods and know-how increase, which helps accelerate economic recovery.

Amid growing public awareness and continued extreme weather events, addressing climate change becomes an international priority post-pandemic. Activists point to falling emissions during COVID lockdowns as an indication that humans can and should change their behaviors to benefit the environment. This message encourages more individuals and businesses to make environmentally friendly lifestyle changes, such as teleworking and reducing meat consumption. Growing consensus and cohesion on climate issues at the multilateral, national, and local levels create a harmonized policy environment in which leaders prioritize decarbonization and climate adaptation. International groups such as the United Nations and global nonprofits work with business and government leaders to aid countries as they transition away from fossil fuels. They also promote climate adaptation strategies, such as building protections against flooding.

Outside of international institutions, individual countries take their own steps to lower emissions. Several—including most European nations, China, South Africa, the United States, and even countries where oil is a major export, such as Mexico—introduce economic policies that include significant environmental legislation, modeled after the EU’s European Green Deal package introduced in July 2020. For instance, many non-EU countries such as the United Kingdom, Canada, China, and those in the African Union bring in carbon and plastic waste taxes to provide much-needed revenue after the coronavirus. They also introduce legislation modeled on the EU’s Carbon Border Adjustment Tax in an effort to support domestic industry while progressing on climate goals. The gains pay of, and revenues from these new taxes help governments get the economy back on track while managing debt levels and maintaining public spending. Other countries, including the United States, Canada, and India, introduce or expand carbon taxes. These efforts gradually help bring down emissions levels from baseline projections despite rising energy consumption, especially in emerging markets.

Societies rely less and less on fossil fuels over the course of the decade as a result of supportive policy, shifting consumer preferences, and advancing technology. A growing number of regional power systems also begin relying on wind and solar energy instead of fossil fuels, and more buildings electrify. In this high-growth environment, investments in research and development rise, which help sustain and accelerate the development of decarbonization technologies and climate adaptation mechanisms. New green technologies and existing products such as EVs and CCS receive more investment and proliferate rapidly, which helps keep emissions in check. As the costs of developing these technologies continue to fall over the course of the decade, they become even more widespread. EVs in particular gain a larger market share in Europe, North America, and parts of Asia thanks to falling prices and more charging stations.

Businesses, enticed by falling renewable costs and growing consumer support for sustainable products, are active players in this transition. Firms support new green technologies and change their energy consumption accordingly. Businesses and governments alike work together to develop more climate-resilient infrastructure, improving building insulation and reinforcing bridges and railways for extreme weather events. Given that climate change becomes a top priority for many consumers, businesses that do not have clear sustainability goals find their goods less popular. High carbon taxes provide more financial incentives for businesses and individuals to reduce emissions. By the end of 10 years, emissions in many advanced economies are down, and those elsewhere are poised to taper downward as well. Globally, emissions do rise over the 10-year period, but not as much as baseline projections suggest. Worldwide carbon emissions reach 44,916 million tons of carbon dioxide by 2030, roughly 1 percent below baseline projections. While lower emissions are noteworthy, the outlook is even more positive. The world has come together and built the infrastructure necessary to stave of the worst impacts of climate change, suggesting a bright future.

Business implications. “New morning” describes an environment in which businesses must be proactive in reducing their carbon footprints to stay competitive. New carbon policies, including taxes, raise the costs of pollution. Companies have an added incentive to improve the environmental impact of their operations as consumer preferences shift toward sustainable products. Firms that do not keep pace with these changes see their bottom lines suffer.

These include traditional fossil fuel firms, which face tremendous pressure to integrate renewable power and negative emissions technology into their business models, as well as companies in a wide array of industries from retail and agriculture to travel and technology. The falling costs of renewables and other emerging green technologies help make these transitions possible.

Scenario 2: Shelter from the storm

High innovation in green technology, low international cooperation on climate

Key dynamics:

Competition between the United States and China, even more fervent after the COVID-19 crisis, thwarts coordinated international efforts to address climate change.
Technology investment and innovation, particularly in the United States and China, are high, and certain green technologies in these countries flourish. Yet these green technology advances do not reach most emerging markets.
The climate outlook is cloudy despite some advances in green technology, as rapid growth, a lack of strict regulations, and continued reliance on fossil fuels mean rising emissions. Global annual emissions growth averages 2.6 percent, and world emissions end the decade almost 14 percent higher than baseline projections.

In “Shelter from the storm,” geopolitical tensions between the United States and China soar, stemming from both countries blaming one another for the coronavirus and morphing into heightened competition in the years thereafter. In this context, coordinated international efforts to combat climate change stall, and countries instead rely on domestic policy alone. Yet the highly fragmented global policy environment brought about by this great power competition yields some ancillary benefits for the environment. As both countries compete in a race to attain “technological supremacy,” innovations in green technologies proliferate rapidly. Despite these technological gains, climate change policy becomes a backburner issue. Instead, “vaccine nationalism,” supply chain decoupling, and high trade barriers dominate bilateral relations for much of the decade. With the international community generally divided between the two great powers, there is little room for global consensus on any issue, including the environment.

Technology innovation accelerates throughout the decade as a result of greater competition and R&D investment after the COVID pandemic. Accurate contact tracing ultimately proves crucial to overcoming the virus, and public support for the tech sector grows. As a result, governments aggressively support Fourth Industrial Revolution (4IR) technologies such as AI and machine learning after the pandemic. Some green technologies also gain from additional support.

The “disaster economy” overall thrives as new tech-driven products emerge—especially as extreme weather events grow more frequent and intense throughout the decade without a coordinated global response. Popular products include mechanisms that use AI to predict the area of a city where a natural disaster will have the most impact. Demand for climate-resilient infrastructure ticks up as major cities such as New York, Amsterdam, and some in parts of China and India decide to take action against flooding. However, progress on decarbonization methods is mixed given lax environmental regulations. Products that need major public investment, including CCS and geoengineering, are starved of funds. The cost of renewables continues to fall, but deployment of floatovoltaics and floating offshore wind power is slow. EVs expand in the United States, the EU, and China because of rising vehicle sales after the COVID pandemic, but they are slow to take of elsewhere in the world.

While advanced economies generally do well economically, emerging markets struggle. Laden with high debt, these countries find themselves without the funds needed to invest in green technologies. As trade remains limited and funds available for domestic technology innovation are low, several of these markets do not have access to the green technologies they need, including flood preparedness systems. Making matters worse, emerging markets are disproportionately hurt by the effects of the soaring temperatures and frequent natural disasters that result from climate change over the course of the decade.

Given rising tensions between the United States and China, the policy environment is highly fragmented, and international institutions weaken. The United States sees international institutions as too pro-Chinese and disengages accordingly. China attempts to take a more central role on the global stage but finds itself distrusted for its handling of the coronavirus. The divided nature of the geopolitical landscape is reflected in divergent consumer preferences, which vary by locality. While sustainable products are prioritized in parts of the United States and most of Europe, for example, they are far less popular in most emerging markets. Some countries in Western Europe pursue environmentally friendly policies, such as taxes on plastics and waste, but these efforts remain a patchwork with limited global benefit. In regions without stringent environmental rules—including many US states, China, and many emerging markets—most consumers prioritize cost and affordability over sustainability in their buying habits. With no international framework and green infrastructure limited to just a few countries, the overall climate outlook is cloudy, with looming storms on the horizon. After 10 years of strong global growth and limited environmental regulation, global emissions have risen to 51,673 million tons of carbon dioxide by 2030, roughly 14 percent above baseline projections.

Business implications. In “Shelter from the storm,” businesses face less pressure to invest in climate mitigation efforts. Many, though, may still find it advantageous in certain regions such as the EU given public support. Falling cross-border trade as a result of US–China tensions affects supply chains, causing global businesses to adjust operations by localizing production. Given the central role of 4IR technology in this setting, goods that use AI or machine learning stand to fare well as investment pours in and products proliferate. These products include “disaster economy” innovations as well as those in the manufacturing sector and extraction industries that maximize production. In this scenario, successful companies are hyper-aware of the local environment and prepared for the fractured policy landscape. Such companies also closely monitor the US–China digital divide, as tensions could mean that tech from one country is not available in other areas. Strategic businesses keep these dynamics in mind when making decisions, particularly those relating to supply chains and global operations, and when deciding which technical products to adopt.

Scenario 3: A hard rain’s a-gonna fall

Low innovation in green technology, low international cooperation on climate

Key dynamics:

The coronavirus causes the world order to disintegrate rapidly as nationalist responses cripple international institutions. There is little consensus or cooperation on climate matters in this international environment, which is marked by increasing fragmentation.
Economic growth, which plummets during COVID, recovers at an anemic pace over the course of the decade; green technology innovation stagnates.
The climate outlook is stormy, as the physical and institutional infrastructure needed to contend with climate change remains unbuilt. Low growth means more turn to cheaper fuels such as coal, especially in emerging markets. The result is a “lost decade” for climate, with emissions reaching 49,790 million tons of carbon dioxide in 2030, 9.7 percent above baseline.

In “A hard rain’s a-gonna fall,” the negative effects of COVID-19 and climate change are persistent and severe. The world economy finds it difficult to recover from the pandemic, with growth remaining weak even in the years after it recedes. In many countries, citizens blame political leaders and public officials for failed responses to the crisis and lose trust in government institutions. At the global level, multilateral institutions are sidelined as more countries choose to ignore their advice and go their own way in hopes of appealing to disgruntled voters. In this fractured world, a coordinated policy approach to combat climate change becomes impossible. The combination of increased geopolitical tensions, most notably between the United States and China, and a weak macroeconomic environment defines the decade. Onlookers begin calling it a “lost decade” for the climate movement as little is done to address environmental goals. The lack of investments in climate-resilient infrastructure exacts a heavy toll in many countries as extreme weather events grow more frequent and severe.

These frequent natural disasters significantly impact GDP, which grows at an average annual rate of just 1.7 percent in this scenario compared with a baseline of 3.1 percent. Climate catastrophes also cause sharp declines in affected regions. These decreases become particularly problematic in countries still reeling from the coronavirus, pushing already overextended governments to their breaking points. As a result, climate-related migration soars, particularly from emerging markets and areas most vulnerable to climate risks. This dynamic exacerbates political tensions in countries receiving immigrants and fuels nationalist and xenophobic ire, especially in countries that were hard hit by the virus, such as Italy and the United States. In a vicious cycle, countries cope by turning more inward and shirking global climate commitments and goals. Attacks on multilateral institutions become even more commonplace, and some countries, including the United States, disengage almost completely. Conflict over scarce resources—such as water—becomes more common and contentious. For example, disagreements between Ethiopia, Egypt, and Sudan over a dam on the Nile River reach a fever pitch, while water scarcity becomes an even more pressing issue in major cities, including Cape Town, Mexico City, and Chennai. These trends feed into public distrust of politicians and experts, which weakens the capacity of political bodies to respond to climate concerns and work with other leaders.

Technological innovation falters as growth remains fairly tepid, political trust disintegrates, and both public and private sector R&D investments dry up. Cross-border transfers of goods and knowledge also decline in an operating environment increasingly characterized by protectionism. Green technologies such as EVs and lithium-ion batteries are available in some advanced economies, but their uptake is slow. Few resources exist to invest in much-needed adaptation technology and resilient infrastructure, and the development of expensive technologies such as CCS comes to a standstill. While wind and solar power still make up a share of the energy mix in many countries, they fail to grow as fast as once projected. EVs also grow very slowly as consumers show little interest in these comparatively more expensive vehicles. Plus, oil prices remain low even after COVID lockdowns are lifted as economies plunge into recessions.

Consumers stop prioritizing sustainable products as most citizens are primarily concerned with their own survival—economic or otherwise. Feeling the pinch in this low-growth scenario, buyers select products based solely on cost. In most regions, this trend means that the public continues to rely heavily on fossil fuels and low-cost, unsustainable products. Cheap coal remains a dominant energy source, particularly in large emerging markets. By 2030, emissions have risen to 49,790 million tons of carbon dioxide—9.7 percent higher than baseline projections and tempered only by low economic growth and lower energy demand overall. The outlook for reducing emissions to levels consistent with the COP21 Paris Agreement is bleak, and the policy and physical infrastructure required to support such carbon reduction efforts remains unbuilt. By 2030, the dynamics exacerbated by climate change— including rising migration, political tensions, and declining GDP—show no signs of improving.

Business implications. In this scenario, businesses everywhere feel the impact of a protracted pandemic and anemic economic growth. Public interest in climate issues wanes, meaning less scrutiny on companies to change energy sources. Sustainable products fall out of fashion as consumers value affordability, particularly in clothing and food. Though energy demand rises once vaccines enable broader economic reopening, it generally remains low in the years thereafter owing to reduced economic activity overall. Many energy companies face difficulties in the years after the virus. For all global companies in this islandized world, there is a strong need to reevaluate their value chains as barriers to trade disincentivize doing business internationally. Companies must also take into account the rising costs of natural disasters and the need for emergency response plans and resilience strategies in an operating environment with limited infrastructure to support recovery efforts. These steps are especially important for businesses operating in areas particularly vulnerable to climate change, such as regions prone to flooding or high temperatures.

Scenario 4: The times they are a-changin’

Low innovation in green technology, high international cooperation on climate

Key dynamics:

The international community—particularly consumers—agrees that addressing climate change is of the utmost importance, and it takes action to reduce emissions in the aftermath of the COVID crisis.

Yet the severe economic fallout from the pandemic plus fervent “techlash” limit resources and slow R&D investment; green technology does not advance quickly enough to make significant strides in addressing climate change.

The climate outlook is mixed, as countries and the public are committed to sustainability, but the technology needed to fully realize these goals remains undeveloped. Global emissions start falling by the end of the decade, owing to shifting social values and low energy demand in a low-growth environment. Total carbon emissions reach 41,053 million tons of carbon dioxide by 2030, roughly 9.6 percent below baseline projections.

In “The times they are a-changin’,” younger generations spearhead the climate movement in profound ways. Behavioral shifts instituted during the coronavirus pandemic persist after the virus recedes, as advocates point to falling emissions during lockdowns as proof that mitigating climate change is both necessary and feasible with some lifestyle adjustments. Such demands only grow louder as Millennials and Generation Z obtain political power. These new leaders also stress the need for global coordination in addressing major problems—a key lesson learned from the COVID-19 crisis.

The urgency of the climate crisis grows after a series of catastrophic natural disasters and extreme weather events take place in the first half of the decade. These include major flooding in Southeast Asia, persistent wildfires in Australia, California, Spain, and parts of Asia, scorching temperatures in the Middle East, and massive hurricanes in large US cities, including Houston and New York. Some of these take place amid and shortly after the coronavirus pandemic, bringing into stark relief the deficiencies in preparedness. As support for racial justice grows around the world, advocates begin framing climate change as an inequality issue, noting that poorer groups, particularly in emerging economies, will bear the brunt of inaction. These movements fuel consumer preferences for sustainable products, and demand for renewable energy reaches new highs.

A green wave occurs in several large economies as climate-conscious leaders start winning elections. This shift leads to many governments introducing policies such as carbon pricing mechanisms in response to growing calls for change. The United States, for example, brings in a carbon tax, while the EU expands existing legislation and raises taxes on waste throughout the decade. The result is a drag on growth for many companies as they struggle to meet ever-expanding regulatory requirements. China also launches its cap-and-trade program after years of delay, which disincentivizes pollution and helps the country get on track to meeting its 2060 carbon neutrality goal. And international institutions, such as the United Nations, the World Bank, and global nonprofits, gain renewed support from the climate-conscious population. These organizations become important forums for managing the world’s response to climate change, and they share best practices with emerging markets as they transition from fossil fuels.

Though policy supports addressing climate change, the technology needed to do so is lacking. As public reliance on technology grows during the coronavirus, more people become suspicious and wary of the industry’s power. Phone tracking during the COVID-19 crisis is met with backlash once the virus dissipates, as individuals realize that their sensitive health data was often sold to the highest bidder. Backlash against the US-based tech giants providing such software soon spills over into growing anger at the pervasiveness of technology in all aspects of society. Consumers in several Western economies reject “big tech” as a result, and popular sentiment moves to reduce its influence on the economy. Politicians in many countries, including the United States, start to break up and regulate some larger technology companies in response, causing shockwaves that reverberate across the sector, including in the climate sphere.

Large technology firms are no longer able to fulfill climate commitments or use funds to invest in green programs. Advances in the green tech needed to transition from fossil fuels stall. This dynamic is exacerbated by continued tepid growth through much of the decade, limiting investments in both adaptation and decarbonization technologies. Certain technologies, such as EVs, expand somewhat but by and large remain too costly for most consumers. Development of climate-resilient infrastructure sees some gains, particularly after the green-wave elections in the middle of the decade. Yet the scope of these investments is limited by the weak global economy, and they often fail to address the climate challenges ahead. By 2030, it becomes clear that well-intended policies and increased coordination alone are not sufficient if they are not matched with corresponding investments in green innovation.

While a foundation of sorts has been laid by new policy frameworks, the outlook is mixed: global emissions levels reach 41,053 million tons of carbon dioxide in 2030, more than 9.6 percent lower than baseline projections. However, limited innovation in green technology leaves significant gaps in the world’s climate infrastructure, creating an uncertain future.

Business implications. Businesses in many sectors will face pressure to address climate change in this scenario. However, low economic growth, driven by slow recovery following the coronavirus and heightened debt levels, will make appeasing consumer preferences difficult. Sustainable products, particularly in food and retail, generally do well in advanced economies, where consumers are adamant about addressing climate change. In other areas, these goods need to be affordably priced, given consumers’ limited spending power. Energy companies find themselves pushed more toward renewables. More oil majors take on aggressive climate plans, for instance, while renewable companies see their business boom from higher demand and government support. Outside of existing renewable capabilities, however, newer and more expensive green technologies receive minimal investment. Similarly, technology companies need to contend with the effects of “techlash” following the pandemic and mount effective communications campaigns to navigate these challenges. The outlook is difficult for many companies as they attempt to meet public sustainability demands with limited resources. Success requires improved sustainability of operations through cost-efficient means and effective advertising campaigns to demonstrate company commitment to the social values championed by younger generations.

Conclusion

Our scenario analysis shows that progress in mitigating climate change makes a serious and quantifiable impact. Strong national alignment and green innovation yield emissions reaching 44,916 million tons of carbon dioxide by the end of the decade—1 percent below baseline projections—and a global annual growth average of 4.4 percent. An environment without effective environmental regulations or green technology presents a very different future. Emissions are far higher, reaching 49,790 million tons of carbon dioxide by the end of the decade (9.7 percent above baseline projections), and economic growth is considerably lower, averaging 1.7 percent during the decade. Making matters worse, losses are likely to continue beyond 2030. Extreme weather events become more intense and more frequent later in the century and the lack of foundation to address the climate challenge will prove more costly. In scenarios in which just one of the two primary drivers advances, the outcomes can also be devastating. In a high-growth world without adequate environmental policy coordination, such as “Shelter from the storm,” emissions skyrocket and entire geographies are left to deal with the consequences. In “The times they are changin,” the opposite is true–emissions fall, but at a steep economic cost.

The spread of COVID-19 demonstrates that advance preparation for crises is crucial to minimizing a disaster’s impact. This lesson holds for the climate movement. Preparation now can prevent catastrophe later. Much like COVID, tackling climate change requires cutting-edge technology and supportive policy. Global coordination is necessary because one country’s efforts to lower emissions will mean little if others do not. At the same time, technology will be crucial to realizing decarbonization goals and developing adaptation needs. The pandemic experience may ultimately reignite the climate movement by encouraging humans to change their behavior or simply to keep many of the lifestyle changes they made during the pandemic. The environment that emerges—commercial and natural—will be fundamentally transformed as a result.

While the specific implications of this Council perspective will vary based on a company’s home market, geographical footprint, and sector, several high-level lessons emerge from our analysis:

Disaster mitigation strategies are becoming more commonplace. The intensity of natural disasters will rise and lead to damages in a growing number of markets. As such, companies such as DHL, Walmart, and Unilever have comprehensive disaster preparedness plans to contend with the threats posed by extreme weather and climate change. DHL even has a supply chain risk management platform, Resilience 360. Disruptions are likely to be most significant in dense urban areas where electricity and water infrastructure facilities are interdependent, leading to cascading service interruptions. Executives who engage in contingency and scenario planning to improve early identification of and effective response to such events will have an advantage.

More businesses are measuring carbon emissions, with their eyes on potential costs. Coca-Cola, Walmart, and Unilever are among the growing number of companies measuring their carbon emissions with an aim to reduce them. Although carbon pricing initiatives still apply to less than half of the global economy, the trend is toward their adoption in more markets in the coming years.

With this in mind, more companies are conducting comprehensive audits of their carbon emissions and the costs of complying with varying levels of carbon prices. The pandemic may play a role in accelerating such audits as more businesses see the financial benefits of reducing employee travel. Further, companies with a strong sustainability mandate or culture may choose to purchase carbon offsets in the near term, such as the ride-sharing platform Lyft. Conducting such an audit reduces the risk of being blindsided by new carbon prices in the future.

Sustainability in business operations is becoming table stakes. Consumers, especially Millennials and Generation Z, are keen on supporting environmentally friendly companies. And the share of environmental, social, and governance (ESG) assets under management has grown dramatically in recent years. As a result, companies from Amazon and PepsiCo to Levi’s and Timberland are incorporating sustainability into their models and pledging to reduce their carbon footprint—or in Timberland’s case, becoming net positive for the environment within the next 10 years. Climate-conscious companies are embracing additional strategies to be better stewards of local natural resources and contribute to the fight against climate change. More companies are also poised to incorporate sustainability into core business operations such as procurement. These efforts provide dual benefits—improving companies’ social standing in their places of operation while also increasing profitability by improving their appeal to consumers.

A clear communications strategy to convey climate change action is crucial. Companies that communicate their sustainability plans effectively to all stakeholders, including consumers, board members, and shareholders, have an edge. The retail sector is a good example: brands that have embraced sustainability seem to have an advantage over fast-fashion groups, many of which have declared bankruptcy. In technology, Amazon, Google, and eBay are just a few of the growing number of companies that have made climate-change action a central part of their corporate strategies and are openly communicating their work to the public. As consumers grow even more aware of climate change and the risks it poses, companies across an array of industries will be challenged with convincing customers that they are engaged and informed on environmental issues. Moreover, many companies will also face pressures to communicate their climate plans with investors and board members as more financial leaders recognize the costs of climate change and demand to see that businesses are taking it seriously.

More companies are leveraging green technology as costs fall and yields increase. As wind and solar power, batteries, and electric vehicles become less expensive and proliferate, more companies are incentivized to use these technologies. Google and Microsoft, for example, expanded their renewable energy portfolios in 2019, while Tyson Foods partnered with Proforest to analyze deforestation within its value chain. As these products become more affordable and more commonplace, more consumers and businesses could gravitate to these options over their unsustainable competitors. As a result, use of these technologies is likely to grow, creating opportunities to reduce emissions and further advance green tech investment and innovation.

The authors wish to thank Terry Toland, Rebecca Grenham, Gabriella Huddart, Radina Belberova, and Omar Almarzooqi for their valuable contributions to this report.