- Climate consumerism has become mainstream, and electorates are demanding robust climate action
- Business is collaborating with government to implement the Green Deal
- Capital has shifted in favour of ESG investment
- Batteries hit the tipping point for cost and storage
- A higher carbon price materialises
- Climate change impacts multiply
The great mainstreaming
It’s 2025, and it´s starting to look a lot like Christmas in Stockholm. Eva Jonsson, a Swedish mother of two small boys, climbs into an electric taxi and heads downtown to do some shopping.
Traditional at heart, she wants to give her kids a beautiful Christmas experience, but she is also eager to build their sense of responsibility for the environment and their community. Eva got rid of her car a few years back (it no longer made sense as more and more of her hometown went car-free) – and her family eats meat just once or twice a week. A coder for a major consumer bank, Eva is a data nerd and can´t help but be an avid carbon tracker. She takes great satisfaction in the low numbers from the ultra-efficiency building her family lives in; and she makes all her purchases with a credit card that calculates the emissions stemming from her consumption, limiting spending in not only kronor but also emissions of CO2.
Eva and some of her friends from university had started to dabble in climate-conscious living in the 2010s. It wasn´t until the end of that decade that policymakers and businesses leaned in with force, recognising that early-adopter consumers like Eva won´t take even a nibble out of the emissions reductions required to avoid catastrophic climate change. Though a long time in the waiting, this leadership paid off. What was fringe behaviour for urban millennials in places like the Nordics has moved into mainstream socioeconomic preferences across demographics and party preferences in Europe.
Much of this fringe-to-mainstream shift can be traced back to the European Green Deal. Announced in 2019, the Green Deal was lauded at the time as the industrial strategy most fit for the climate challenge. In 2021 we started to see evidence that Ursula von der Leyen and her team, in partnership with member state governments, meant business: they started the hard work of implementing the transformation needed to cut emissions by 55% by 2030 – a ‘must-make-it’ milestone on the way to carbon-neutrality in 2050.
The people have spoken
From the vantage-point of 2025, we see that 2020, by so many measures an annus horribilis, provided policymakers with a powerful springboard from which to attack transformation. The real legacy of the pandemic, it turns out, was a sea-change in public readiness. It was not only that electorates learned that very big changes could be executed at scale and at pace. The pandemic brought home, in deeply personal ways, the inevitable consequences of an economic system that is wired to deplete the planet.
So when scientists confirmed that 2020 was the third hottest year in humankind´s 800,000-year-old historical record (despite that year´s La Nina, which should have cooled temperatures), a critical mass of voters were ready to listen. Some – especially 18-30-year-olds but also a new and growing ´grannie gang´ – took to the streets in late 2021 as part of a distributed ecosystem of protestors. The main message was this: lock the door to the past, double down on climate action, or we´ll remove your mandate to govern.
The European Commission set the frame, but the real inflection point came when the Green Deal poured fuel on three powerful market forces that collided to produce projection-defying decarbonisation across industries.
Market force 1: capital allocation undergoes an earthquake
A key memory from 2020 is the steady parade of net-zero pledges from companies, especially in Europe and the US. These announcements, which covered the full industrial spectrum, were motivated not only by a desire to be on the right side of history but also (and perhaps more importantly) by a recognition that capital allocation was changing seismically.
Indeed, between April and June 2020, in the early months of the pandemic, we hit a record for sustainability investment. Funds that prioritise ESG investment – that is, companies with business models that deliver not just financial but also environmental, social and governance-related returns – saw global assets under management hit USD 1 trillion. This number climbed steadily through to 2025 as ESG-based investments regularly outperformed the market average and the EU rolled out a taxonomy to help investors pick bona fide sustainability ventures.
What we saw in 2020 turned out to be the early tremors preceding an earthquake in the landscape of capital. Billions flowed out of carbon-intensive industries into companies perceived to be net-zero enablers. The oil and gas sector, the engine of the 20th century world economy, underwent deep change. As access to capital tightened for hydrocarbon exploration and production, the sector both consolidated and split into two camps, with European majors typically doing what they could to lean into the advance of clean energy, while others doubled down on their legacy businesses to fight for remaining demand.
By 2025, no matter the industry, it is not enough that business here in Europe simply eliminate their own emissions. Investors scrutinise not just scope 1 and 2 emissions but also scope 3. No company is competitive if its business model does not actively suppress emissions along its entire value chain.
Market force 2: batteries turbo-charge electrification
In 2023, a year earlier than projected, average battery prices fell to $100 per kilowatt-hour (having been at $1,000/kWh in 2010 and $156/kWh in 2019). Advances in storage technology followed. The knock-on effects were far-reaching.
In 2025, EVs have hit cost parity with diesel and petrol cars across all European countries. By this time, most European countries have committed to ambitious targets for ending sales of new fossil fuel cars, with Norway leading the pack. But Europe´s car manufacturers had already seen the writing on the wall. By 2025, VW had invested EUR 73 billion in EVs and self-driving tech; a third of the cars BMW produces are electric. The century-long dominance of the internal combustion engine in personal transport is over.
Analysts are saying we´ll have to wait until 2030 before trucking can be electrified at meaningful scale (mainly due to the size of the infrastructure that needs to be in place for it to work, and the battery efficiency needed to bring down the weight). And the EU´s hydrogen strategy is on track towards the target of getting a 100,000 hydrogen-powered trucks and 1,000 refuelling stations on the road by 2030. In the meantime, the existing truck fleet is increasingly tanked up with highly regulated biofuel, refined from biomass harvested from land unsuitable for food or feed production. From this strategy we see a double win: first, a new revenue stream for central and eastern European countries (several of which are trying to make the transition from coal); and second, a loosening of the supply-side constraints that had prevented biofuels from fulfilling its reduction potential in shipping and aviation.
Beyond transport, the advance of renewables in Europe´s electricity mix is also cleaning up its residential sector, a major source of emissions. Between 2020 and 2025 – stoked by government grants, zero-interest rate loans and tax rebates – Europe´s market for heat pumps took off. Not only does this tech jive with Brussels´ interests in reducing reliance on energy imports; it also cleans up air quality in homes and starts to take a significant bite out of residential building emissions.
Market force 3: a higher price on carbon starts kicking
For a decade or so before the Green Deal, investors and innovators had watched eagerly for pledges to strengthen the EU´s Emissions Trading Scheme (EU ETS) to actually convert into a robust price on carbon. On each occasion the watchers had cause to be disappointed. In the second half of 2020 the price per tonne of CO2 floated at around 28 euros, far short of the 100 euro range considered to be required to reach the target of net-zero emissions by 2050.
In 2021, to the surprise of many, things started to happen. The Commission pushed on with measures to take out the oversupply of carbon allowances – the principal reason for the historically limp price. And the trading scheme was extended to include shipping – other sectors follow in the ensuing years. By 2025 the per-tonne price has climbed to 60 euros, and the Commission has instituted (after many revisions) a border tax on carbon to protect Europe´s best-in-class industries from dirtier international competitors.
Sixty euros per tonne of CO2-equivalent represents a massive (and surprising) jump, but it is still too little to knock down barriers to all the technology we need to get to net-zero. To fill the gap, something more is needed. Carbon Contracts for Difference are playing a decisive role by paying low-emissions companies against a higher carbon price. And the EU´s EUR 10 billion Innovation Fund is driving the commercialisation of low-carbon technologies.
By 2025 the market signal from these measures is unmistakable. Still too expensive and too small-scale to make any substantive impact, carbon capture and storage is starting to attract more meaningful investment. And yet, with a renewables-based electricity system and a highly electrified transport sector, the job that Europe needs CCS to do is much smaller than originally anticipated, and is slated to focus on industries like cement where emissions can´t easily be taken out by renewables.
When it comes to carbon pricing, the EU is not the only player on the pitch. One of President Biden´s first initiatives, which surprised many by gaining narrow bipartisan support, is collaboration on a federal carbon tax. And after launching its own cap-and-trade scheme in 2021, China has advanced quickly, making good on its plans to expand from coal- and gas-fired power generation to other sectors. In 2025, the market internalisation of carbon is decidedly underway.
Change the narrative, change the world
Looking back from the vantage-point of 2025, we see how this faster-than-projected change depended not just on explosive chain reactions among market forces but also on a deep reset of the interface between government and business.
At the heart of the reset was a shift in narratives. Partnership-killing storylines – about bureaucratic incompetence and private sector avarice – were set aside. United by shared desired outcomes, government and business found a new way of collaborating that moved beyond a transfer of cash. This form of collaboration was instead about combining respective strengths: taking the democratic legitimacy, public policy expertise and early-stage investment muscle of governments, and welding it with the technological capacity, business modelling know-how and scaling expertise of companies.
So, in 2025, propelled by tipping points in the market and much more dynamic public-private partnerships, Europe´s emissions continue to decouple from GDP. Between 1990 and 2016, Europe´s GDP had grown by 53% while its emissions fell by 23%. From 2020 to 2025, the trend continued, with GDP growing steadily if a little modestly with emissions dropping by 40% of 1990 levels.
To sum it all up: we have 60 months and 15 percentage points to go before being able to proclaim success on our bid to reduce emissions by 55% by 2030.
This is definitely stretchy – but not outlandish. The sentiment in Europe´s capitals is more or less: we can do this! And yet we are not even halfway to carbon neutrality. What´s more, scientists and activists are admonishing, with increasing stridency, that neutrality by mid-century is too late. These warnings gain force as the climate system punishes emissions from the past, meting out storms, floods, fires and droughts to countries around the globe, rich ones and poor one alike. It is of course the latter who suffer disproportionately – many have not recovered from the human and economic devastation wrought by the 2020 pandemic.
The European Commission is now signalling that it may table a proposal next year to bring the carbon neutrality goal forward. It is not clear how it will fare. What is clear is that, no matter what, the final stretch to neutrality – removing almost 3.3 gigatonnes of CO2e from Europe´s economy, nearly as much as was emitted by India and Canada combined in 2019 – will be steep and hard.
A promise broken
As we start the journey from 2025 to 2030 we very quickly notice our handicap: jobs. While industry has created masses of jobs to drive Europe´s new economy, they are too few and not evenly distributed. Simply put: the Green Deal´s Just Transition has not been as just as it needs to be.
For Eva Jonsson and many others, adjusting to life in the era of the Green Deal has been relatively painless and indeed quite enriching, especially in comparison to life during the pandemic. But those that found it easy typically had something in common – their home countries entered the pandemic with relatively diversified, strong economies with robust social safety nets and lower dependence on fossil fuel production.
For people in historically carbon-dependent countries, the transition has been more painful. In the early years of the Green Deal – from 2020 to 2023 – the Just Transition Mechanism compensated these harder-hit countries with funding to help pay for the reskilling of workers and the creation of new jobs for them to go to. But the funds fell short of the need. And now, as we close out 2025, electorates in these countries are becoming justifiably disgruntled – fertile ground for the anti-science populism that we know from experience will slow our advance on climate goals.
The clock strikes 11
In 2025, Europe has much to be proud of. We are competing internationally in clean tech. The companies that changed their business models are thriving in a low-carbon economy. Air quality has improved and with it public health and productivity. Biodiversity is beginning to recover. We have made a respectable dent in our emissions. But we also know we started the push at the 11th hour. So not only do we have to pay the price in terms of impacts; we also have to sprint harder, for longer, to make it.
The early successes of the Green Deal were made possible because of a renewed business-government partnership. To see this agenda through, this partnership needs to hold, outliving electoral cycles and terms of service.
The woods are lovely, dark and deep, but I have promises to keep, and miles to go before I sleep…
Signals of change
While the story above is fiction, it is inspired by real-time trends. The following ´signals of change´ connect the scenario to current trends.
Capital - the villain becomes the hero?
Because of its historical preference for short-term returns, finance was for a long time considered a brake on the evolution of a low-carbon economy. But this is changing. In July 2020, assets in sustainable investment funds hit a record high of just over $1 trillion. Green bonds hit $255 billion in 2019, up 50% from the previous year. Increasingly these investments simply make investing sense, with the long-term performance of ESG funds outpacing traditional funds on a one, five and ten year timeframe. For the companies that move, the reward could be great; those that resist risk punishment. According to research conducted for the UN-backed Principles for Responsible Investment, regulation, carbon pricing and technological disruption could wipe between $1.6 trillion to $2.3 trillion off the market cap of the world´s biggest companies if they don´t reduce carbon exposure.
Europe – playing to win(d)
During the first half of 2020, renewable energy’s share in the EU´s power generation mix jumped by almost 10 percentage points to 40%. Over a third of this share comes from wind. Europe is doing especially well in the offshore wind market – to some extent thanks to its success in repurposing offshore competence and infrastructure from its oil and gas industry. By 2022, capex in offshore wind is set to surpass that for oil and gas exploration and production – a pre-covid trend buoyed by low oil prices. Europe´s contribution to storage will also help make offshore wind increasingly competitive. At present China is dominant, producing almost 80% of the world´s lithium cells. But Europe is catching up, its manufacturing capacity growing faster than that of both China and the US. By 2030, Europe is expected to pass Japan, South Korea and the US to become the world´s second largest producer.
Nota Bene: hard-to-abate sectors
Europe´s decarbonisation successes to date have relied on doing what is easiest first – driving energy efficiency and fuel-switching as well as scaling renewables-based power. But a significant portion of global emissions (22%) are locked in the so-called ´hard-to-abate´ sectors – highly energy-intensive industries like steel and cement that supply the inputs for the built environment (which is undergoing particularly fast expansion in emerging economies). It isn´t that the technological solutions don´t exist – they are, however, more expensive. But the Energy Transitions Commission estimates that the decarbonisation of these sectors might not cost more than 0.5% of global GDP.
Impacts of climate change – right here, right now
One of the hardest things for the public to understand about climate change is the delay between emissions and the climate´s response to those emissions. Even if we turned off our CO2 taps now, a range of climate impacts are already locked in. As temperatures rise we are likely to see more disease. Between 2004 and 2018, US cases of vector-borne illnesses doubled. We can expect more wildfires like those that destroyed 2,800 homes in Australia in 2019-2020 – and more drought, like the one that helped stoke the conflict in Syria. More storms are on the horizon as well – crop failure, water scarcity and rising sea levels could force up to 143 million people to leave their homes.
SDGs: two steps forward one step back
In late 2019, countries around the world re-committed themselves to the Sustainable Development Goals – a raft of objectives agreed in 2015 that together form a globally agreed framework for human development. And though progress had been patchy, there were real advances to be proud of – not least the decrease in extreme poverty, falling child mortality rates and increase in the share of children and youth in school. But covid has violently interrupted this progress, threatening to push an estimated 71 million people back into poverty, the first rise since 1998. School closures have kept 90% of the world´s students out of school and caused over 370 million children to miss out on school meals they depend on. The global gains in reducing child labour are likely to be reversed for the first time in 20 years, as families make heart-breaking choices to protect incomes. From experience we can expect girls to bear the heaviest brunt. It is estimated that covid will result in 2.5 million more child marriages and that we´ll see a concomitant rise in developing nations´ birth-rates.
Agriculture – a centrepiece in climate action
The global food system accounts for more than 30% of the world´s greenhouse gas emissions. A huge portion of these emissions stem from soil erosion through tilling and overgrazing. These practices not only transfer carbon from the land to the atmosphere, but also destroy our ability to grow food. But if we shift to more regenerative agricultural practices – as outlined in the acclaimed documentary Kiss the Ground – we can produce safer, more nutritious food while not just locking carbon underground but also drawing down legacy emissions. It is estimated that soil on agricultural land could draw down approximately 1 gigatonne of carbon a year – the equivalent of 10% of total CO2 emissions from fossil fuels in 2018. That said, ´carbon farming´ needs careful planning, management and verification, and offsets should not be used as a reason by industry to avoid actual abatement.
Svein Tore Holsether, CEO of Yara