Patterns, partnerships and a Marshall Plan for the planet

Read this article to understand:

• The three rules that can help deliver the transition to a net-zero future
• How being more ambitious on net zero could be a competitive advantage for countries and companies
• Why applying a Marshall Plan-type approach to the climate crisis would be a “massive non-zero-sum-game” for the global economy

First, take a cupful of mathematics and marinade it in a love of science, engineering and the world’s unfolding patterns. Then, mix in a rich blend of years spent in business and industry, stir thoroughly before bringing to the boil, and let simmer for several decades.

Add a garnish of politics and a sprig of articulate language and then serve, hot, to a hungry gathering. It’s not the easiest of dishes to make but, prepared properly, it amounts to a deliciously potent recipe for making change happen.

This recipe also gives you the essence of Nigel Topping, which is just as well because he contains all its key ingredients. Topping is the UN Climate Change High-Level Champion appointed by Boris Johnson in the run-up to the 2021 COP26 climate summit in Glasgow. His job has been to mobilise businesses, investors, cities, regions and other non-state actors behind bigger and faster efforts to tackle the climate crisis, showing governments the real economy is already speeding towards a resilient zero-emission economy by 2050.

A case of herding mice, cats and tigers, perhaps – or of cooking with both sugar and spice – but Topping has his own particular style and, with it, a carefully crafted menu for success.

He agreed to talk to AIQ just months before his tenure as climate champion came to an end, although he made clear that he will remain involved with it and other environment-related activities, under the auspices of the United Nations, in a governance role. 

While High-Level Champion, Topping was also named as an independent director at the government-owned UK Infrastructure Bank that was set up by former chancellor Rishi Sunak and launched in June 2021. He particularly enthuses about this because of its goal of channelling public and private finance together in the drive to achieve a net-zero carbon economy.

“That’s just another bit of policy information that says: ‘here’s a domestic development bank that’s here to unlock more private finance flows,” he says.

Mathematics and problem solving

Topping’s approach is rooted in his understanding of maths, which he studied to master’s level at the University of Cambridge during the mid-to-late 1980s, followed by a second master’s degree in holistic science from Schumacher College in Devon nearly two decades later. These underpin his belief in the power of systems, or the science of patterns and their underlying rules.

His life in between consisted of a prolonged period in industry, including as a senior consultant at Lucas Industries, a parts manufacturer for the automotive and aerospace sectors, and a member of the management board at TMD Friction, the world’s largest maker of brake pads.

Topping is also the former chief executive of We Mean Business, a coalition of businesses committed to halving emissions by 2030, and a one-time executive director of the CDP (formerly known as the Climate Disclosure Project), a charity that helps businesses and cities report their environmental impact.

Taken together, this background in both academia and industry means, not only does Topping have an ingrained understanding of the conceptual arguments about how the world works in principle, but he also gets it when it comes to how commercial life plays out in practice.

“There’s something beautiful about solving problems and finding patterns. Although I did maths at Cambridge, I was never interested in going into the international financial system. I wanted to work in something concrete. My father is a civil engineer. It’s why I went into industry; it’s real people making real things, not like finance, where no-one makes anything,” he says.

“Global finance is good at making money, but only that. It’s not good at actually delivering value to society. It’s good to a certain extent – the algorithm that drives innovation, but it doesn’t solve issues for a lot of things unless those goals are designed structurally. It doesn’t solve redistribution; it actually exacerbates inequality.”

Patterns and planetary boundaries

It seems clear from Topping’s comments that it’s not that he doesn’t like the financial system per se, it’s that he doesn’t like the patterns that dictate the way it behaves.

Topping believes all things human and natural, from the workings of a rivet factory to the causes of a warming planet, can be seen as a set of ever-repeating patterns. These patterns can be disrupted to reset the systems they create, he argues – adding that applying this approach to the climate transition can be more productive (and more encouraging) than looking at the issue through the lens of political or economic science.

But can patterns really help save the planet? “I think we have a very dangerous, educated tendency to be reductive,” Topping says, bristling slightly at the baldness of the question. “I don’t think we can solve something as complex as the catastrophic relationship between our current model of industrial capitalism and the scientific boundaries to existence with linear reductive thinking.

“It requires a much more holistic understanding of the interplay between values, Earth system science, social structures, institutions, economics. There’s no silver bullet here. We’ve created a beautiful, complicated edifice that optimises for the wrong goals,” he says.

“The question is what are we designing for, because the system is designed by humans. When we reductively just try to optimise individual bits, we end up with an emergent design goal no-one has actually chosen.”

So, be wary of pushing in at one part of a bulging seam only for the problem to resurface elsewhere and make matters worse.

Three rules for transformation

Topping has laid out three “rules” he believes, if they are followed by all players in each of the world’s systems, can help transform those underlying patterns and ensure a successful transition to a zero-carbon future.

First, he says, we must “harness ambition loops”. This means locking in the positive effects of bold climate commitments, with policy measures such as tax breaks and subsidies to forward-thinking businesses, which in turn fosters invention.

Next, we must “set exponential goals”, Topping says, arguing history shows that, while the early stages of a transforming development might be slow going, progressively lower costs and increased innovation ensures growth quickly becomes more rapid over time.

A real-world example is the application of Moore’s Law to the semiconductor industry, where the number of transistors that can be crowded onto a microchip continues to double roughly every two years.

Topping has also cited batteries for electric vehicles, where costs continue to reduce substantially each year, while their efficiency in terms of storage rises. This in turn helps fuel the growth of electric vehicle sales, which can only be good news for energy efficiency.

The third rule is to “follow shared pathways”, ensuring everyone involved takes the required action so as to reach net zero in time to limit global warming.

The three rules are so seductively simple and appetisingly ambitious, it’s tempting to argue we need a paradigm shift in the world’s thinking, away from the conventions of capitalism, economics and politics.

“We need evolution not revolution. Good luck tearing things up and then rebuilding without collapse,” Topping says. “I don’t think we need to smash and rebuild, but it is quite a big paradigm shift deciding what the purpose of an economy is. We've had this lazy thinking, based on a misreading of Adam Smith, that an economy will deliver wellbeing if you just leave it alone. That is so demonstrably wrong.

“When you say paradigm shift, often it’s a paradigm shift away from the myth of what business and markets are about. We need a paradigm shift, for example, away from the idea there’s even such a thing as a free market. It’s palpable nonsense.

“A market exists because it’s a set of rules that govern trading behaviour. I can’t just walk into Totnes market and start selling something. Somebody is required to take money off me to set up my pitch and there’s a certain way I have to behave. A market is a mass of rules – the idea of a free market is a myth perpetuated by those who benefit from outsourcing externalities.”

Dealing with externalities

Those rules, many of which don’t serve the goal of reaching net zero and limiting climate change, are gradually being changed as part of the transition process, Topping says. And those “externalities”, or consequences of our actions for which we’ve not taken responsibility, are slowly being brought on board.

“We are changing them. For example, one of the biggest externalities we’ve ignored since the industrial revolution is the pollution of the atmosphere, which causes the climate crisis. And we are starting to do that by pricing in that externality in all sorts of different ways – literally pricing it in, in some cases through, for example, [carbon] trading schemes.

“Indirectly, we’re pricing it [climate change] in at infinity by banning combustion engines or coal-fired power burning; or implicitly through a requirement to publish transition plans, which the UK now has. The paradigm is changing, but we’re in the middle of that shift now.”

But there’s a problem. We’re not moving quickly enough. In the UK, for example, the government has laid out a bold set of climate targets, but is failing to deliver with policy implementation. It is not currently on track to enact its “green industrial revolution” in time for the 2050 deadline, according to the independent Climate Change Committee’s (CCC) most recent report in June. It is clear the pace of change has to accelerate.

“That’s kind of my point about exponential goals,” Topping says. “As we’ve seen in this movie a thousand times before, and the way technological transition takes place, the good news here is the technology and economy and climate science all line up – i.e., the end goal is much more desirable. We end up surviving, and we end up with a bigger economy and cheaper energy costs.

“How do we do it? Well, in the UK we’ve got a lot of good mechanisms; I mean the CCC is an amazing bit of institutional innovation. To a large extent, it’s taken the politics out of advice to governments.

“So instead of civil servants working for one minister advising the government, you’ve got an arms-length body advising parliament, and using quite blunt language sometimes about the failings of the government of the day. It's quite healthy in a democracy if we've committed to something legally and we’ve set up a body to critique the government’s efforts. When you don’t have that it’s much harder.

“What we’re not doing yet is driving the feedback loop between the public and the private sector – or the ambition loop as I call it – which builds confidence on going faster and faster. In Denmark, they have it built into law now as they have to update their policies every year, and they do that in consultation with the private sector. That’s building confidence.”

Race to the top

There is evidence some governments are beginning to ratchet up their efforts to accelerate the transition process, which in Topping terms would help feed into his idea of harnessing the ambition loop.

“There’s a whole bunch of people who’ve committed to net-zero by 2050 and who are now saying 2040. Once you’ve spent three or four years seriously looking at what it means, then people get more ambitious.

“The CCC’s advice to government includes a scenario where we get to net zero in 2042. The only reason they’ve given advice on 2050 is they’ve been asked to give advice on how to get to net zero in 2050. I think the most economically and competitively attractive scenario is one where we get there faster.

“In the US, California has said it will get to net zero in 2045, as have Germany. Some of the biggest economies in the world are committing to net zero in 2045. The UK is still aiming for 2050, so we’re actually aiming to be uncompetitive, which is a bit dumb.”

There is also an increased drive among business to move more swiftly, which should help to feed into the same virtuous circle of Topping’s ambitions. He is a commissioner on the Energy Transition Commission, whose 2018 report Mission Possible, he argues, “flipped the paradigm”.

“We had a series of CEOs from those sectors saying: “Here’s a way we can get to net zero, and, by the way, it won’t cost as much as you think; it will have no impact on the end user economically; and it’s do-able.” So, immediately, you start getting individual companies committing to get to net zero in 2050, and some of them 2040. Maersk said 2050, and two years later it’s saying 2040; Mercedes says 2039, two years later it says 2030; Sony says 2050 and two years later it’s saying 2040.

“So now we’ve got sectoral collaborations figuring out what the roadmap is and de-risking the transition. That is emboldening for policymakers, which changes the conditions for the laggards to realise they are going to have to change.”

Moreover, consumers – or as Topping would rather describe them, citizens - have an important part to play.

“Citizens wear multiple hats, one of which is as a consumer, but the others are as a voter, a parent, an investor, or a productive member of society. I don’t like the paradigm of labelling people as consumers. That’s a coercive power statement that boxes people into one role in society, which is one important but small role, where they have power but it’s not the only place where they have power.

“Citizens have a huge role. You see that with citizen activists. They’ve changed the politics of this country because politicians have seen the level of [feeling]. They may have gone too far in some cases, but they’ve definitely made politicians aware there’s a mass wrong. And the fact people are buying electric vehicles way faster than anyone thought possible a few years ago is a signal to policymakers and to market participants to have more confidence in investing in that transition.”

Partnerships and innovation

But there are other, concrete measures that can be taken now, including greater collaboration between the public and private sectors. Topping believes the UK should jettison its fear of “private sector policy capture”, or big business gaining too much influence over government policy.

“You need to open it up [the collaborative conversation], but frame it as a consultation about, not how we get to net zero and what the risks are, but how we get there faster,” he says.

“We need to embrace the massive need for more electricity. As a global pioneer in wind power, particularly offshore wind, the UK has a great opportunity to have energy security at a predictable low cost. We need to recognise all the energy price pressure now is because of the volatility of gas; we should recognise we’ve got really cheap wind power. We should be looking to make ourselves competitive in terms of energy and that means taking advantage of the massive opportunity we have.”

As an example, Topping says the UK should be channelling investment into projects such as XLinks in Morocco. This is an electricity generation facility, linked to Britain, that will be powered entirely by wind and solar power, aided by battery storage.

“It’s a project that would bring masses of effectively baseload renewable power from Morocco into the UK at a price half the cost of nuclear in a quarter of the time and would lead to two manufacturing facilities being built in the UK. That means jobs, energy security, a low cost of energy, innovation, global leadership. We faff around with things like that because ministers are uncomfortable with innovation or industry.”

Naturally, he would have no truck with a new coal mine in Cumbria, a government decision about which has been delayed several times. But the biggest move would be a globally co-ordinated umbrella plan, far more detailed than the Paris Agreement, designed to both free up private capital flows and end the financial and climactic vulnerability of emerging economies.

A Marshall Plan for the planet

“What we need – which is why the GFANZ work in mobilising finance in emerging markets is so important – is global Marshall Plan-type thinking,” says Topping. (GFANZ stands for Global Financial Alliance for Net Zero and is a coalition of financial institutions that aims to speed up the decarbonisation of the economy.)

“The Marshall Plan came out of the Second World War when there were a lot of potentially productive economies on their knees and when there was a real risk of global conflict. And the Marshall Plan, and the USA, had the wisdom to say: “Actually, we need to invest in growing those economies because the best way to grow our own economy is for the whole pie to grow.”

“Again, we know the world economy will be much bigger when we solve for a resilient net-zero climate everywhere, not just Europe. But there will also be much less conflict in the world if we invest in that because we will be partners in development and growth around the world rather than enemies. And you have to say that global geopolitics doesn’t look very collaborative at the moment, which is why the mechanism of the Paris Agreement is still a miracle of multilateralism and our biggest hope for driving that kind of change.”

Topping says the developed world’s 2009 pledge to mobilise $100 billion a year in public and private climate finance for developing countries by 2020 – a target made at COP 15 in Copenhagen that was consistently missed – is nowhere near enough.

“To use a mathematical term, Paris is necessary but not sufficient, particularly on finance,” he says. “It’s a trust signal, which is crucial and why we need it, but actually we need $2-3 trillion per year more, and 70-80 per cent of that needs to come from the private sector. But we do need more public financing.”

The response of the West to the global financial crisis and COVID-19, of printing money to throw at the problem, has been “a brutal act” of driving inequality and further indebtedness into the system, he argues. The idea of a “global war bond”, as discussed by the financier George Soros, or the issuance of special drawing rights, a reserve asset created by the IMF and used in size late last year, are far more attractive propositions and could wipe out emerging market debt in double-quick time, he says.

“We are starting to internalise the physical ecosystem boundaries of climate and biodiversity and oceans; we’re still doing a variable job of internalising the externalities that come with inequality,” Topping says.

The indebtedness of emerging and developing economies is central to the climate problem and solving it would make a meaningful contribution to a secure and fair transition, Topping says.

He complains about the absence internationally of the Chapter 11 bankruptcy rules that exist in the US, which mean a company can acknowledge a debt problem but continue to trade while it’s ironing it out.

“The World Bank is supposed to deal with that [the problem of heavily indebted countries]. There are mechanisms, but they don’t work – so the three countries that have gone into those processes have never come out.”

He notes, for example, that a small US hurricane might inflict a minimal hit to US GDP but wipe out at a stroke the annual output of Barbados and the Bahamas, forcing them even further into debt.

“We’re not yet designing the levels of capital flow in terms of public finance and leverage of private finance. The release from the debt trap can be done in multiple ways: debt restructuring, KPI-linked bonds [key performance indicators, linked to sustainability], catastrophe clauses, or the extension of insurance cover.

“It’s a vicious circle: lack of insurance cover, increasing indebtedness, higher cost of capital, lack of capital to fix the problems caused by others. So, we’re driving indebtedness down the spiral. We have to solve for those three issues, of poor capital availability, which means more public capital but better leverage, less indebtedness and more insurance cover.

“It’s difficult, but we’ve done things like this before; and we have the scientific evidence; we all agree we have to get to net zero now. We also have the economic evidence that doing this together is way better. It’s a massive non-zero-sum game.”

Putting an end to finger pointing

Incidentally, Topping is a big fan of GFANZ, which he co-founded with Mark Carney in 2021, but critical of the late arrival to climate action of many of the financial institutions behind it.

“If we’re honest, what we saw for a long time from the financial sector was clubs pointing fingers at policymakers and at the companies they held in their portfolios, telling them what to do.

“That’s not leadership; that’s what you do when you’re on the terraces at a football match – shout at the referee, shout at the centre forwards. Leadership is getting on the pitch and being prepared to make a fool of yourself, which means making a statement about what you’re prepared to do and then being accountable for doing it.”

In fairness, he puts the financial sector’s tardiness down to its role servicing the entire economy.

“And that’s part of the challenge. How do you manage the transition without jeopardising your share of the profit pool based on the current paradigm? It’s a difficult one. But that’s flipped now, because we have a critical mass of financial actors financing the transition and now we’re working through the mechanics of that.”

But, in spite of the apparently slow pace of progress, the infighting and the lack of political will in some quarters, Topping has cause for hope about the future. Not optimism, it should be said, which he describes as the “Panglossian belief the world will be fine, which means you don’t have to do any work”. This is a reference to the character of Dr Pangloss in Voltaire’s novel Candide, who argues that “all is for the best, in the best of all possible worlds”.

“I think there’s cause for hope, because a lot of people are doing the hard work now of figuring out how we make this transition, how we mitigate the damage and how we accelerate the transition. The evidence scientifically, economically and socially of that momentum is self-evident,” Topping says.

“We are seeing more elements of the design needed being discussed publicly and being taken seriously. I was just in the Bahamas at a meeting of 22 government leaders and we were talking about it. We’ve now got Vera Songwe [economist and the UN’s under-secretary general] and Nick [Lord] Stern leading an international commission writing a paper to be presented to the two champions and the presidencies on, not how we go from $100-120 billion, which is the wrong answer, but how to solve for the $2-3 trillion more that needs to flow in emerging and developing markets excluding China to get to a resilient net-zero future,” he says.

“That’s a fundamental shift in design thinking from ‘let’s put in a symbol of goodwill’ to ‘let’s solve the problem’.”

Some final words of advice

The backdrop to our conversation has been the unseemly battle for the leadership of the Conservative Party and, in turn, for the next prime minister to replace the outgoing Johnson. Topping has previously criticised the absence of any clear plan for the climate transition among the leadership contenders, who early on in the race even appeared ready to abandon the UK’s legally binding climate commitments under the Paris Agreement.

Asked whether he has any advice for the new PM Liz Truss, Topping is characteristically erudite.

“I think it would be about using the genius of British engineering and the power of the world-leading British financial system to drive the second industrial revolution, like we drove the first. We should aim to make Britain the most competitive economy in the world as a result, and create long-term, attractive new jobs in, you know, battery factories in Northumberland and Cumbria and in offshore wind services in Aberdeen and everything in between.

“It’s straightforward: jobs, economic growth, competitiveness and innovation. We’re brilliant at it. Seven of the ten Formula 1 teams are based in the UK because we’re the best engineers in the world; the City is one of the most important financial centres in the world. Take those two; amazing workforce, great engineering; great financial innovation. It’s a recipe made in heaven. If only people could get over the nimbyism and the fantasy of investing in the last century’s jobs.”

Spot the ambition loop, and the gameplan for redirecting some patterns, in that. The Topping recipe can sometimes take some stirring, but who can argue the dish it could produce wouldn’t be worth it?

Miles Costello is a multi-award-winning writer and journalist.