07 Jan Is 2021 the year we see clear action on reaching net-zero by 2050?
2020 was a year filled with commitments from many countries in reaching net zero by 2050. Will this year represent a time when we understand what measures and action will be taken to achieve this?
The pandemic became the predominant force of 2020, overshadowing nearly every other event of the year. Aside from the implications of Covid-19, 2020 represented a year when commitment towards climate change came into the spotlight.
Promises to reduce greenhouse gas emissions as much as possible by 2050, offsetting any remaining emissions now represents a benchmark for reaching the goals laid out in the Paris Agreement i.e. to ensure global temperature rise does not exceed 2 degrees celsius and ideally remains below 1.5 degrees Celsius within this century.
The commitment towards reaching the 2050 target was gaining added momentum by the end of 2019 with several nations and major corporations. 2020 represented an important year for action on climate change. The COP26 conference in Glasgow, which had to be rescheduled was regarded as a critical time to understand our overall global progress on climate commitments since the Paris Agreement was implemented.
Then the pandemic hit and COP26 along with many other important events were impacted, but climate-related commitments continued despite forecasts that the focus on battling the pandemic would reduce climate action. Last year saw Japan, South Korea and Canada release official statements promising to reach net-zero by 2050. The UK and Europe continued to strengthen their own goals and China, the largest emitter in the world said it would work target a goal of net-zero by 2060.
Leading corporations too joined several nations in announcing their targets, including Facebook, Mercedes-Benz and some of the largest oil majors such as BP and Shell.
The rise of net-zero commitments is positive but ultimately they are only commitments and often lack the detail and structure to show the exact route to reaching the target, the investment required and the changes to assets to realistically achieve the net-zero goal.
Many energy professionals have highlighted the considerable gap between what countries have promised and the measures that have been taken towards meeting these targets. In 2021, the challenge will focus on whether these measures will become clearer and that we will start to see decisive action.
Dan Klein, head of energy pathways at S&P Global Platts explains that 2021 represents a very important year, a transition from goals, targets and aspirations to real-life action and changes. How exactly do we plan to reduce our emissions and reach these targets for 2050?
Global media organisation Fortune has raised a few important questions for 2021.
Will Biden control the Senate?
The US election was a landmark movement in American climate policy. Contrary to Trump’s views on climate change, Biden has called climate change the “existential threat of our time” and has promised that the nation would quickly re-establish its place in the Paris Agreement and commit to supporting clean energy policies and the development of electric vehicles. The shift in climate policy in the U.S. is significant and to many energy experts is a potential catalyst towards other nations and the progress in global climate action.
The long term success and impact of reestablishing climate policy in the nation was dependent on whether the Democrats took control of the Senate after the run-off elections in Georgia. Early reports this week suggest the democratic party are on verge of taking control of the Senate. Simon Flowers, the chairman at Wood Mackenzie explains that so much depended on the Georgia runoff. Taking control of the Senate will enable Biden to act on his pledges to address climate change. These commitments, however, come at a very challenging time, with the nation experiencing the economic implications of the pandemic, resulting in employment levels reaching nearly 10 million. Flowers highlights that are relatively safe to say that the economy will represent the main priority for Biden and climate policy could be pushed aside in the coming year.
Is China capable of reducing coal quicker?
Much of our climate effort will depend on the progress in China. In September 2020, the government of China stated that it would work towards a net-zero target of 2060, a decade later than most nations, but still a target. While the news represented a major shift in terms of industry in the nation, many questions were raised about their continued dependence on coal, which makes up over 60% of power generation in the country. Chris Midgley, the global head of analytics at S&P Global Platts explains that there is about a decade of emission growth in China within that target, with emissions due to only reach peak level in 2030.
The impact of the pandemic raises further questions about how exactly the pandemic recovery will play out in China, with certain recovery policies regarded as highly energy-intensive.
Will recovery plans focus on shifting to green?
While the opportunities for a transition to low carbon have been promoted, the initial costs and investment to enable this movement are significant. The EU has declared a major COVID recovery package with a predominant emphasis on low carbon, but this has faced some resistance from certain nations such as Poland who continue to have a large reliance on the coal industry. On the other side of the pond, the Biden Administration has pledged a $2 trillion climate plan within its campaign trail, but there are no clear assurances that a deal of this level would be successfully passed.
Energy analysts believe that most nations are yet to declare clear plans to show that they intend to fund investments plans for a low carbon transition. This has been further complicated by the low oil and gas prices, resulting from a historic decline in demand during the global lockdowns. Encouraging customers that have faced economic hardships to invest in potentially higher energy costs could be another challenge. In other words, if budgets have been slashed and you have to spend more money upfront, there is a chance that you will delay investment into certain low carbon projects. There is a challenge within this energy transition with fossil fuel prices being so low at such a crucial time.
Major action is required
All climate experts agree that time is of the essence in terms of making the transition towards a low carbon world. While we expect to continue to see more net-zero 2050 commitments this year, the truth is that we need to focus more so on the interim targets and the delivery of a clear pathway for 2025 and 2030, exploring exactly how countries intend to manage and operate over the coming years.
For leading oil majors that have committed to the 2050 target, this will inevitably mean a continued pattern of acquisitions and sales. Energy portfolios will likely radically change as a result of this process. This movement needs to be visible in terms of further expansion of affordable technologies and assets i.e. large scale wind and sales, electric grid development enabling power to be brought to new regions. For example, green hydrogen is a particular focus of investment for the UK, Australia and South Korea and offers many opportunities, but remains minuscule in scale and years behind other mainstream sources of renewable energy. To reach an affordable and effective scale will require significant government support.
There are positive signs that commitments this year will result in major transitions. Filling in the gap between now and 2050 is the biggest challenge, but there are signs things are starting to move in the right direction.