There is a looming energy distribution revolution, highlighted by a declining demand for fossil fuels, creating a new reality in which investors make decisions, Christina Figueres, executive secretary of the UN Framework Convention on Climate Change, told delegates at the ACSI conference.
She says a shift in the energy sector, as large as the shift from land lines to cell phones in the communications sector, is set to take place, evidenced by the decoupling of the directional curves of GDP growth and greenhouse gas emissions.
Where previously GDP growth and GHG emissions were on the same projector, they are now decoupled, this has been one of the aims of the UN Framework Convention on Climate Change.
“It used to be that GDP and GHG went hand in hand. That is no longer the case. Las year the OECD countries grew by 7 per cent but greenhouse gas emissions of those countries went down by 7 per cent. There is no longer that link,” she says.
Adding to the “new reality” is the fact renewable energy is more competitive, because of generation and also storage. (She mentioned the new off-grid Tesla battery announcement as a game changer.)
“There is no doubt in the next 20 years there will be a distributed energy revolution. There will be a shift in the energy sector like the shift from land lines to cell phones,” she says.
Figueres says that all 194 countries are party to the Paris agreement, and committed to a reduction in greenhouse gas emissions.
The Paris agreement aims to act as a guide to transform the energy and infrastructure sectors and to be protective of growth and development at national and global levels.
“We have started, some governments have already populated the framework. The EU countries have committed to reducing by 40 per cent their 1990-emissions by 2025. Mexico, US and Russia have also already come in, and Australian targets will be handed in in July. China has announced it is peaking its coal use by 2020 and its entire greenhouse gas emissions by 2030.”
Figueres says that by October about 80 per cent of greenhouse gases will be under a management plan.
“Your decisions are taking place in the context of three changing realities,” she says. “Institutional investors need to consider a new reality, and I urge investors to review their investment policy in this context,” she says.
In addition to policy changes and agreement among 194 countries to manage emissions, climate finance has also had a renaissance.
In 2012 there was $300-600 billion per annum flowing into clean energy, technology and infrastructure. Last year there was $270 billion into renewable energy alone.
“Ministers of finance have finally woken up to the fact this is not a green agreement but a finance agreement. Now there is a discussion about leverage which would catapult us into a new economy,” she says.
“High carbon and high cost, high carbon assets are impacted by regulation and weakening fossil fuel demand. We need to avoid an abrupt systemic shift, it is in everyone’s interest for there to be an orderly transition of capital and technology.”