Climate Transformation – Investing in the vision for the future

Climate Risk Recruitment

Climate Transformation – Investing in the vision for the future

In the last month, the International Energy Agency (IEA) released a historical report announcing a detailed pathway to reaching net zero emissions by 2050. The net-zero target is regarded as essential for limiting global warming within the pre-industrial levels. The world generated over 30 billion tonnes of carbon dioxide last year, so reaching net-zero demands several massive economic changes.

The IEA states that there is no need to invest in a new fossil fuel supply, making it quite clear that additional fossil fuel expansion is not by global climate targets. While emission reduction has received a lot of attention, the IEA provides detail on various green activities that require scaling up. The impending economic transformation will be what UN envoy Mark Carney referred to as the biggest commercial opportunity of our time. 

Renewable Power

A low carbon future must commence with the power generation industry. In the scenario detailed by the IEA, renewable energy will account for about 90% of our global electricity by 2050. A transition from our fossil-fuel world requires massive investment in new capacity, improvements in the grid and power storage. The IEA estimates that clean energy investment will need to at least triple every year by 2030 to a figure of over $4 trillion.

Renewable energy capacity has been increasing, with positive figures regarding solar and wind power installation, however, the overall installation rate needs to triple by 2030 and increase by about 900% by 2050 to meet our demands.

Connecting these power sources with businesses and customers will also require massive upgrades to our current infrastructure. Smarter and flexible grid networks are vital for providing reliable clean power for the future. Around 25% of the total $4 trillion will need to be allocated towards energy infrastructure. One major element of this will be energy storage. The costs for batteries have fallen rapidly and deployment is increasing but battery deployment remains relatively low. The IEA suggests that those rates have to increase 40 times by 2030 and 80 times by 2050.

Energy Efficiency and Electricity

The IEA net-zero scenario involves a thriving planet in 2050, with an increased economy and over 2 billion people, yet the IEA believes this more prosperous and larger world will require 8% less energy than today. Such progress is only possible with major investments in energy and resource efficiency. One industry where increased efficiency is important is in the property market. Building construction and operation accounts for 40% of global energy and generates a similar figure of CO2 emissions. Innovative retrofit programs can massively improve energy efficiency but again, the IEA believes the rate of change needs big improvements. New construction must also focus more on net-zero buildings, which at present represent only 1% of the global building stock. The IEA estimates that this figure needs to rise to 85% by 2050.

At the core of energy usage and emissions reduction is electrification. To create a sustainable future, electricity will be required to power all activities and within each sector, electrification represents several opportunities for investors. For example in the property market, electric heat pumps provide an opportunity to increase energy efficiency and reduce the reliance on fossil fuels. There are 180 million heat pumps currently installed, but the IEA anticipates this rising 10 times by 2050. Transport represents the most obvious industry experiencing the electrification revolution. Many of the leading automotive businesses have confirmed the launch of new electric vehicle models and governments across the world are pledging to be a halt to the sales of petrol and diesel-powered vehicles. Despite the clear efforts, there is a lot that needs to be done. At present, less than 1 of the 1.4 billion vehicles on our roads are electric. Studies suggest this figure needs to rise by 20% by 2030 and to 90% by 2050.

DEcarbonisation requires significant transformation across the entire worldwide economy. The IEA’s net-zero pathway is focused predominantly on renewables and the opportunities associated with energy efficiency and electrification. In the net-zero scenario, by 2050, the majority of vehicles on our roads are expected to be electric, planes will be reliant on advanced and synthetic fuels and industrial sites will be applying carbon capture or hydrogen techniques. This concept requires massive development in new fuels and negative emission systems. Hydrogen and alternative fuels have huge potential in the shipping and aviation industries, areas that could be difficult for electrification. Investment in these emerging technologies is needed to drive down the costs and enable them to progress further.

The challenge of climate change is there but the IEA shows that investments in decarbonisation offer the opportunity to create positive social, environmental and financial returns. By harnessing the options available from delivering a sustainable economy, we can prosper while creating the best path for the future.

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