1985 scientists noticed drastic drops in ozone over the continent, caused by a damaged layer over the Antarctic, the ozone hole. The news was dramatic enough to bring the world together and battle the threat to our atmosphere. In just one-year time 24 parties signed the Montreal Protocol, which enforced the phase-out of substances that deplete the ozone layer. The protocol had a disruptive impact on companies who used ozone-depleting substances, such as Chlorofluorocarbons (CFCs), which had been widely used in refrigeration, air-conditioners, foam products or aerosols. Some businesses failed to respond and went bankrupt, others simply found substitutes for the banned products to stay in business; e.g. deodorant manufactures replaced the spray can with a pump. More importantly, the regulations fostered innovation, one of the most remarkable happened at an unexpected place in east Germany: In 1992, DKK Scharfenstein East Germany’s last remaining refrigerator manufacturer, was struggling against the western powerhouses Miele, Bosch, and Liebherr, but DKK embraced change faster and found ways to build HFC-, CFC-free refrigerator. Thanks to their production limitations in East Germany employees have been used to constraints, which gave them a competitive edge in coming up with new ideas. Despite the false critics, such as explosion risk, over 65.000 pre-orders made the product launch a huge success. Looking backward the Montreal protocol was a monumental achievement, where science, enterprises, and politicians worked together with a sense of urgency and true will to rescue the planet.
Why we don’t see this momentum against Climate Change?
There are similarities between the Ozone Depletion and Climate Change, both are examples of changes to the planet’s environment caused by human releasing substances into the atmosphere, causing harm on a global scale. Furthermore, they will both likely take international cooperation to address. Although there are similarities between these two, there are also differences, so this time it is Friday for Future, instead of Greenpeace, but the key problem is that humanity struggles to take action. It looks so basic, as, in theory, today’s available technology could resolve climate change right now. But the truth is that we’re far from changing our mindset and behaviors at scale, and carbon footprint reductions end in talks.
Why we have not acted yet?
Delivering results requires firm cooperation between politics, business and society across the planet to agree on a structural change, which is laser-focused on what matters: Reduction of the carbon footprint. But the truth is that none of those players is truly committed to solving the problem, it’s the ultimate prisoners’ dilemma. Consumers have a built-in bias discounting risks that appear in the future, and consequently limit a rational response, similar as humans avoid the annual dentist visit. For enterprises, climate change is not compatible with today’s economic mechanics, as it would threaten corporate profits. Lastly, most political systems do not value uncomfortable decisions and long-term success. All of this adds up to is a vastly complex prisoners’ dilemma with a high number of participants, incomplete information and asymmetric incentive scheme for the players. Practically speaking, we are very clear about the problem space and know what’s needs to be done (reduce carbon footprint), but we have not found a clear path to execute yet. The challenge is hard because it is structured like the Prisoner’s Dilemma. Each person must suffer greatly in the short-term to win in the long run. Following the Game theory, 2 potential solutions may overcome the dilemma.
1. Repetition
By playing the game twice, the participants learn from the bad result and collaborate to optimize the outcome. In the context of climate change, this means a change of behavior would take effect after humanity directly feel the consequences of global warming. This solution based on the assumption that climate change won’t extinct humanity and is reversible.
2. Enforcement
Generally speaking, enforcements regulate participants’ decisions through a third-party authority, like a government. This can happen via a different mechanism, such as laws, taxes or incentives. The key is that those measures change the cost and benefits radical enough, so that collaboration becomes the optimal solution for rational actors.
While the situation of climate change is complex, and perhaps there is no pain-free solution, there is a certainty that not acting boldly will harm our planet, and the cost of doing nothing goes far beyond the short-term pain of structural changes. We need bold political leaders who act long term and don’t sacrifice the planet for short-term growth. Those leaders need to enforce a radical climate change agenda. This is going to be painful and to a certain degree “unfair”, especially for developed countries in Europe and the US. But screwing up this planet is not an option.
