The State of Climate Change in 2025: Setbacks, Solutions and Silver Linings

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the spring of hope, it was the winter of despair.” Dickens might well have been writing about 2025.

Looking at the headlines, you could be tempted into thinking the world of climate change response is all the latter and none of the former right now. 

Climate Setbacks: Politics, Policy and Rising Emissions

The US has cancelled large parts of former President Joe Biden’s signature climate law, the Inflation Reduction Act, and withdrawn from the Paris Agreement for a second time. New Zealand climate programmes have been curtailed. Politicians smile and say “drill baby drill”, even when there is perhaps nothing there to be found when you do*. Global emissions are still rising, and both atmospheric and sea surface temperatures continue to set new records. An endless series of weather events (the Nelson/Tasman region in NZ and northern NSW to name a few recent local examples) provide a constant reminder that climate consequences are upon us. Yet the media often fails to mention that the frequency and intensity of these events is related to climate change.

Looking Beyond the Headlines: A More Nuanced Climate Story

As is often the case, the real position is more nuanced. Once one looks behind the headlines, our collective response to climate change is far from doom and gloom. There are plenty of silver linings to be found. Let’s break it down.

Positive Momentum in Clean Energy and Climate Action

The changes in the US are certainly significant, but perhaps not as much as one might think from the media coverage. Tax credits for new wind and solar in the US have been terminated. But solar in particular remains by far the cheapest way to add extra capacity. And tax credits remain for some other forms of renewable energy, such as geothermal, which will encourage further uptake, and also for clean-tech manufacturing and carbon sequestration.

Energy transition is roaring along, with a record US$2 trillion in investment in 2024. Increasingly, China is taking the lead. A majority of renewable capacity which went live globally in 2024 was in China, and it is by far the world’s largest exporter of cleaner energy formats, such as solar panels and batteries.

The US is the world’s second largest exporter of fossil fuel gas, and a comparatively tiny exporter of clean tech. For China, the situation is reversed**. With the recent changes to US policy settings, China’s competitive advantage in clean energy equipment looks set to continue. The policy baton on climate change, and the related investment response, appears to have been passed on to China, the EU, the UK and others.

Corporates and Investors Stay Committed to Climate Goals

Large companies are not backing down from climate action. A PwC survey of over 4,000 listed firms earlier this year found that 84% are either increasing or maintaining their climate objectives and commitments.

Investors do not appear to be losing their nerve on climate response either. Signatories to the UN Principles for Responsible Investment (UN PRI) account for an incredible US$120 trillion in assets under management. The UN PRI reports that these investors are not pausing or walking back their responsible investment activities, but are moving to reduce their use of terms of “sustainability” or “ESG”. There is more private engagement between investors, companies and governments, and less interest in signing up to public statements and pledges.

For example, major US banks were in the headlines earlier this year for withdrawing from the Net Zero Banking Alliance. Yet their loans to fossil fuel projects actually fell by 25% in the last 12 months. Their actions speak louder than their words.

Climate Law and Accountability on the Global Stage

The focus of the legal system on climate is intensifying too. In July the planet’s highest court, the International Court of Justice, released a landmark advisory opinion on climate change. This significant opinion found that climate change is an existential threat, and states have legal duties to reduce emissions and regulate businesses’ climate impacts. The judges found that states have to act in line with limiting warming to 1.5°C above pre-industrial levels, not 2°C or some other figure, and are obliged to act so as to avoid causing significant harm to the climate system.

This decision has wide-ranging implications in human rights law, environmental law and international law.

Innovators Driving Low-Carbon Solutions

Innovators like those in the CVCF portfolio are getting on with the hard work of building low emissions technologies that handily outcompete their high-pollution predecessors. These “better, faster, cheaper” alternatives are decarbonising everyday product categories, such as cleaning products (Cleanery), zinc (Zincovery) and water treatment (NovoLabs).

Supporting Climate Solutions Locally

We would, of course, like to see more capital flowing towards these innovators. That’s why Climate Venture Capital Fund 2 (CVCF2) is happening. We’re intent on contributing further to the positive, local solutions to global emissions problems.

Of course, we’d like to see more ambitious climate policies by our governments. If we can drive this transition faster, climate change will have less impact on vulnerable communities, will cost less and the economic returns will be greater.

But in the meantime, let’s not be put off by negative headlines or by performative politicians. As the Māori whakataukī (proverb) goes, “he kai kei aku ringa” (there is food at the end of my hands). We’re a resourceful lot, and we’re getting on with the task at hand.