Fidelity: Net zero needs decarbonisation solutions

Fidelity: Net zero needs decarbonisation solutions

Klimaatverandering Energietransitie
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Despite global cooperation on climate change, a chasm remains between government plans to cut emissions and the shared goal of net zero by 2050. Nascent decarbonisation solutions may help bridge the gap. That states Fidelity in a commentary.

Much of the discussion at the COP26 meetings in Glasgow this month was about finding new pathways to cut emissions. For years, the world has underestimated the scale of the climate emergency facing us. Global warming can only be limited to 1.5 degrees Celsius if we halve greenhouse gas emissions by 2030 and cut them to net zero by 2050.

But current plans announced by governments would only reduce 2030 emissions by 1 per cent from 2019 levels. Taking a sector-by-sector approach, we estimate that existing decarbonisation technologies have the potential to cut over 80 per cent of global carbon emissions, if fully adopted globally.

At the ready

Decarbonisation is no longer an abstract idea that needs transformation into real world solutions. The technologies are widely available today, including renewables, green hydrogen, clean transportation, recycling, buildings efficiency, industrial automation, alternative protein, 5G and cloud computing.

A low-carbon or carbon-neutral world requires integrating all aspects of the economy - everything from resource extraction, to manufacturing, agriculture, construction, transport, and power - with technologies that generate energy and materials with little to no carbon output. This means minimal emissions across populations, buildings, machines, and consumer products, from production to operation to disposal.

There are varying studies of the cost to fully decarbonise the global economy, but one of the best estimates - by Goldman Sachs - has put the current-price cost at $ 4.8 trillion per year, with a total spend of $ 144 trillion by 2050. If we decarbonised by half, the annual cost would be around $ 1 trillion.

The way forward

To succeed, public and private entities would have to massively ramp up funding for decarbonisation solutions, forcing entire industries to re-think their business models. For companies innovating these solutions or able to efficiently adopt them, there are substantial multi-decade growth opportunities ahead.

Key policy areas that can stimulate decarbonisation include establishing a price for carbon - as the current price is too low. Another form of support is subsidising new technology, while policymakers could also restrict the use of high emissions technology.

Though ready and viable, some decarbonisation technologies still need to be scaled up. Others need to become economic first. This will require sourcing financial backing for those solutions that are as yet commercially uneconomical, or introducing incentive schemes to accelerate adoption in other areas.

The potential for growth in decarbonisation technologies is huge, with rising demand and widening application across multiple industries. The world desperately needs these technologies and, fortunately, some financial and policy support is beginning to flow through, but much more needs to be done.