Deregulation is often framed as essential for economic growth, but recent corporate rollbacks on climate commitments highlight its limits. Companies that once pledged bold action on sustainability are now reversing course, prioritising short-term financial gains over long-term environmental and social responsibility.
BP’s reversal on renewable investments in favour of fossil fuels is telling. After pledging to cut oil and gas production by 40% by 2030, the company abandoned the target to boost shareholder returns. Financial giants like Wells Fargo and HSBC are also backtracking on climate commitments, citing slow renewable progress and opting for weaker targets.
Meanwhile, the fossil fuel industry continues to lobby aggressively. In 2024 alone, fossil fuel companies met Canadian federal officials 1,135 times—over four times per workday. In the EU, top fossil fuel firms and affiliates held over 1,000 meetings with officials from 2019 to 2024 to influence climate policy.
Without strong regulation, similar reversals will continue, jeopardising global climate targets and exposing economies to the long-term costs of inaction. As the World Bank notes, every USD spent on climate resilience saves six in future costs, and delaying action by a decade nearly doubles those costs.
The focus on short-term profits clashes with sustainable energy’s economic model: high upfront costs but low operational expenses and zero fuel cost. Achieving long-term gains demands a broader perspective.
Policies and Regulation as a Tool for Economic and Environmental Stability
Governments play a critical role in ensuring industries adapt to the changing global landscape. Regulation and incentives are not just environmental safeguards—they are economic imperatives that mitigate financial risks, guide economic, industrial and societal transitions, and protect national and regional economies.
The financial cost of climate inaction is clear. In 2023, the US faced 28 climate disasters, totalling over $90 billion in damages. The 2020 California wildfires caused $19 billion in losses, while 2024’s Hurricane Milton and Hurricane Helene resulted in $60 billion and $55 billion in damages, respectively. China’s 2024 floods and European storms added another $29 billion in economic losses.
Insurers like State Farm and Allstate have stopped offering new policies in high-risk states, warning of growing climate-related risks. Their retreat underscores the need for strong government intervention to manage these risks.
Regulations such as stricter building codes, carbon pricing, and disaster preparedness policies reduce these costs by encouraging prevention over crisis response.
Market forces alone won’t accelerate the renewable energy shift. Governments must enforce emissions targets, hold corporations accountable, and incentivize investment. China’s renewable dominance, driven by state-backed policies, shows the success of active intervention. In contrast, Europe’s slower growth highlights the risks of relying solely on market incentives.
Only 16% of major companies are on track for net zero by 2050, while 45% have increased emissions. Without robust regulation, voluntary pledges won’t deliver meaningful change.
Well-structured policies can also ease economic disruption. Renewable energy added 700,000 jobs in 2022, bringing the global total to 13.7 million. In the US, solar and wind jobs now outnumber fossil fuel workforce. By supporting renewables, retraining workers, and enforcing sustainability standards, governments can ensure a stable, thriving economy.
Governments Must Lead and Collaborate with Industry —Not Defer to Industry
While companies can innovate, they will not drive systemic change without policy intervention. Governments must enforce clear, binding regulations that penalise backtracking on climate commitments, incentivise investment in renewable energy, and provide financial and regulatory support for industries to transition.
Strong regulatory frameworks have already proven effective in accelerating the energy transition. Sweden’s carbon tax, introduced in 1991, led to a 30% reduction in emissions while maintaining economic growth. Germany’s Renewable Energy Act helped increase the share of renewables in its electricity generation from 6% to over 40% in just two decades. Meanwhile, the EU’s Emissions Trading System has cut emissions in regulated sectors by more than 40% since 2005.
Regulation is effective at the national and local levels. In China, clean energy sectors contributed to just above 10% of total GDP in 2024, namely due to growth in economic output in these sectors. Local governments are also proving its impact. Ann Arbor, Michigan, developed the A²Zero Carbon Neutrality Plan, a comprehensive policy framework designed to transition the city to community-wide carbon neutrality by 2030. This plan includes powering the electrical grid with 100% renewable energy.
Regulation is not a hindrance to economic progress but a vital tool for managing transitions, ensuring resilience, and protecting public and economic interests. The debate is not whether the private sector should replace government action—it is why governments must lead. A hands-off approach will not deliver a timely energy transition. Strong, proactive regulation is the only way to ensure a sustainable and resilient future, where a renewables-based economy fosters prosperity for all.
