Q&A With Azeem Azhar on Climate Change

Azeem Azhar's opinions are his alone and do not necessarily reflect those of Global X. Charting Disruption is our annual thematic research project. It shows the disruptive themes that are changing the world using charts, graphics, and more. The four main sections (Personalized Medicine, Experiential Technologies and Experiential Medicine) are all unique but are linked by the power of innovation and the potential to transform the world. Global X ETFs' Research Team partnered closely with experts from consulting, academia, and investing. Below we discuss the current state of climate change and some of the most promising mitigation or adaptation solutions with Azeem Azhar.
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Azeem is an award-winning entrepreneur and strategist. Azeem is a renowned podcast and newsletter producer on technology's impact on our future economy. The climate crisis was caused by human activity. But, innovation from humans can resolve it through economy-changing strategies that encourage decarbonization.
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What can the world do to reduce climate change? The Intergovernmental Panel on Climate Change reports that there is no way to stop the rapid rise in temperature.1 This is based on science that suggests that climate feedback loops will trigger dramatic climate effects that could lead to runaway processes such as melting glaciers and ice sheet. It is crucial to reduce the climate change impact by decarbonizing our economies using technology, behavior change and nature-based solutions. It is important to have a positive view of the adaptations climate change may require.
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Economic activity is essential to maintain prosperity in richer nations and make it possible for people in less developed countries to have more prosperous lives. These goals can only be achieved within the limits set by the biosphere if we make behavioral changes, adopt new approaches to economic activity and invest in enabling technologies. This action plan offers a tremendous opportunity for innovators to be part of the solution.
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Investors are interested in how government actions such as the Inflation Reduction Act (U.S.) and green funding (EU) can help accelerate the adoption of climate technology. These actions will create demand for solutions to climate change, which will give investors confidence that these markets will be available, and encourage investment.
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Many of these technologies are able to benefit from the experience curve. This means that prices drop as more demand increases. Investors who invest earlier can see a greater price drop. This can be a boon in good economic times. The government can act as an investor or buyer last resort, and help with difficult technologies entering the market. Take the U.S.
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The government's intervention in the RNA platform a decade back or in enabling GPS system enables. However, during difficult economic times, visibility from strong funding and direction setting by governments is more than a bonus. It allows for the government to act at a sectoral level or favor certain technologies or firms. This approach is likely to be successful because it gives markets the signals they need to act, without telling them what to think.
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The laissez-faire approach of the 1980s is not what Catalytic government uses. Many companies have made significant pledges to reduce their carbon footprints, whether out of self-preservation or altruism. How can the private sector be an innovation engine?
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Firms are more likely to invest in these services if they have made upfront commitments to switch to renewables or buy carbon reductions. Competition and learning drive down prices as more companies join the ranks. This in turn attracts more customers. Moribund markets that lack innovation and are too expensive can be revived if the flywheel turns.
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Apple, for instance, has signalled its intent to make its supply chain carbon-neutral by eliminating Scope 3 emission.2 These emissions are not produced by Apple. They are indirect and produced by suppliers who make the products Apple uses. Scope 3 emissions include emissions from customers who use their products. Apple's transition could lead to hundreds of suppliers becoming carbon neutral or losing Apple's business.
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This powerful ecosystem effect can make suppliers more attractive partners for other original equipment manufacturers (OEMs). How can we achieve net-zero emission by 2050? This green transition can create opportunities for businesses in the value chains of vital clean technologies like renewable energy, hydrogen, and electric cars. We achieve net zero global emissions by increasing our low-carbon electricity generation, which is primarily from solar but also from other renewable and clean energy sources such as wind, hydropower and nuclear. Excess electricity is necessary because net zero means that we must switch the entire energy system. This includes electricity being used for industrial processes, heating, truck, and marine transportation.
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Directly, we'll be using electricity via heat pumps and buses powered by batteries. Indirectly, we'll also use electricity via zero-carbon intermediates such as hydrogen for steelmaking and transport fuels. To remove atmospheric carbon dioxide, we will also use electricity to power direct-air capture technologies. These technologies have significant learning rates, which is the rate at which prices fall as a function of cumulative installed capacity. We can expect huge cost reductions in all of these areas.
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These foundations of the green shift are economically viable and more attractive than keeping a hydrocarbon-based economy. According to the National Renewable Energy Laboratory (NREL), the cost of solar power systems at utility scale fell 82% in the decade following 2010.4 Prices for electricity from utility-scale solar also declined. Lithium-ion batteries prices have continued to fall since 1990.4 The price of lithium-ion batteries dropped 98% in the same period.5 The new renewable electricity grid will look more like an internet. It will be more widely distributed, bi-directional and digital. Clean energy is only one part of the solution. Modern economies are dependent on large amounts of material inputs.
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These systems will require a lot of innovation to scale up technologies. H2 Green Steel, Electra and Lanza Tech seek to reduce carbon emissions from steel production. Lanza Tech aims at producing carbon-neutral jetfuels. The market for carbon capture-and-storage (CCS), is expected to expand significantly.
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Artificial CCS will reach 40 megatons by 2021. However, the potential scale of business opportunities is measured in gigatons.8 These innovations will open new markets and create new opportunities for entrepreneurs. Climate change is likely to lead to increased food and water scarcity. We are starting to see AgTech solutions like precision agriculture and controlled environments that leverage data and AI to maximize yields and minimize inputs.
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What are some examples of success stories and what factors might encourage more adoption? It is far more efficient than traditional agriculture and produces healthier food. Vertical farms like Infarm and 80 Acres Farms are able to go through multiple growing seasons each year because of investments in machine learning and robotics.
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This velocity allows for greater iteration and learning which further drives down costs. Vertical farming's modular approach to product-oriented agriculture makes scaling easier than traditional field-based agriculture. Vertical farming is more predictable than traditional field-based agriculture because it uses modular product-oriented farming. Farmers can also get detailed information about their crops using a variety of communication networks, including satellite internet and low-power wireless.
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Sensor technology could lead to higher yields, lower wastage and lower pesticide and fertilizer costs. This includes companies involved in renewable energy production, energy storage, smart grid implementation, residential/commercial energy efficiency, and/or the provision of pollution-reducing products and solutions. This includes companies involved in renewable energy production, energy storage, smart grid implementation, residential/commercial energy efficiency, and/or the production and provision of pollution-reducing products and solutions.WNDY: The Global X Wind Energy ETF seeks to invest in companies positioned to benefit from the advancement of the global wind energy industry
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This includes companies that develop autonomous vehicle software and hardware as well as companies producing EV components like lithium batteries and other critical EV materials. Please click the fund name to view current fund holdings.
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