Author: Matthias Taft, CEO, BayWa r.e.
The United Nations (UN) has stated that unless global greenhouse emissions fall by 7.6% each year between 2020-30, we will not meet the target of keeping the global temperature rise to within 1.5°C.
And while it may not sound like much, a difference of just half a degree between 1.5°C and 2.0°C is predicted to have a huge impact. We could see 50% more of the global population exposed to water stress, significant increases in heat-related deaths and forest fires, and a doubling of the risk that insects and plants will lose 50% of their habitat.
Emissions increased by 1.5% per year over the last decade, only flattening in 2019. Driven by Covid-19, they fell 6.4% in 2020 but the UN’s World Meteorological Organization has called any emissions reduction resulting from Covid-19 as a ‘tiny blip’ in the rise of greenhouse gases.
The UN’s ‘Emissions Gap Report 2020’ is unequivocal: we have just a small window within which to radically reduce global emissions, a window that closes around 2030.
What then can be done in the window of opportunity we have left?
In this series of articles, I will be looking at some of the most critical drivers needed to propel the renewable transition forward at the pace needed. From government policy and the need for more ambitious emission reduction targets, to investment and innovation, and the decarbonisation of the transport sector.
Let us start by looking at the need for a massive expansion in renewable energy while at the same time proactively moving away from fossil fuels.
Replacing fossil fuels with renewable energy is vital if we are to reduce greenhouse gas emissions and undertake decarbonisation. This will require a massive expansion in the deployment of renewable power, but also a proactive move away from fossil fuels.
The International Renewable Energy Agency (Irena) has stated that renewable energy will need to supply 57% of global power by 2030, up from approximately 27% in 2020, if we are to limit climate change to 1.5°C. That will require a fourfold increase in the speed of renewables growth and will require annual renewables investment to rise from USD 329bn at the end of 2018, to USD 737bn by 2030. (Source: Recharge).
There is much to do, and the pace of the renewable transition must increase, but there are encouraging signs. The International Energy Agency (IEA) has said in its latest ‘Renewables 2020’ report that, despite Covid-19, record levels of renewable power will have been added in 2020 totalling almost 200 GW. This additional capacity has been led by wind, hydropower and PV. The IEA’s outlook for 2021 is also encouraging. It predicts 2021 will again see record levels of renewable capacity added and the fastest growth rate since 2015.
However, the IEA also warned that policy makers need to take steps to support the strong momentum behind renewables. And this will be key to ensuring renewable expansion progresses at the pace needed.
The uncertainties from policy incentives for renewables ending in key markets including China, the US and India are predicted to result in a small decline in the growth rate of renewable capacity additions in 2022. But, if these countries can address these policy uncertainties in time, the IEA estimates global PV and wind additions could each increase by a further 25% in 2022.
Renewable capacity continues to expand, and if policy uncertainty can be replaced with policies that provide market and investor confidence, that expansion could move forward at greater pace. However, on the other side of the coin, we find a directly opposing and conflicting scenario with regards to support for fossil fuels.
The ‘Production Gap Report (2020)’, written by leading research institutions in collaboration with the United Nations Environment Programme (UNEP), states that between 2020 and 2030, global coal, oil, and gas production would have to decline annually by 11%, 4%, and 3%, respectively, to be consistent with keeping global temperature rises to 1.5°C. Instead, government plans and projections indicate an average 2% annual increase for each fuel over this time period.
In a previous LinkedIn article, I talked about the trillions of dollars and euros being injected into economics by governments around the globe to help stimulate an economic and socio-economic recovery from Covid-19. A global stimulus package that has the potential to become a green transition stimulus package.
However, as it stands, governments have committed far more Covid-19 funds to fossil fuels than to clean energy. As of November 2020, G20 governments had committed USD 233 billion to activities that support fossil fuel production and consumption, as compared with USD 146 billion to renewable energy, energy efficiency, and low-carbon alternatives.
If this pattern continues, the missed opportunity this represents cannot be stressed enough.
We have a once in a generation opportunity to change our ways and use the colossal sums of money being invested to drive froward a green transition that represents our last and best hope to get on track to 1.5°C. Currently, we are failing to grasp this opportunity and rather than recovery packages and economic stimulus funds that support a sustainable recovery, we risk further “carbon lock-In”.
If we are to limit climate change to 1.5°C, any investment in fossil fuel generation is at risk of becoming a stranded investment. It should be in the interests of investors and financing agencies alike to avoid such a massive misallocation of human and financial capital.
To have any chance of slowing down climate change, we must unquestionably and unequivocally turn our backs on fossil fuels. Instead, a massive increase in renewables investment must be enabled by a redirection of fossil fuels investment.
What we as businesses, governments and society decide to do next will determine our direction of travel for the rest of this decade. In turn, it will determine whether we avoid a global climate catastrophe or make it a reality.
We must act, and we must act now. We must make this our decade of opportunity; the Decade That Matters.