What the Energy Transition Needs
The path to a decarbonized world exists, but it is currently strewn with regulatory and market obstacles. With an estimated $131 trillion of investment needed to achieve mid-century climate targets, governments and the private sector must come together to ensure that incentives are properly aligned.
COPENHAGEN – There are encouraging signs of progress in the fight against climate change. Thousands of businesses have joined the Race to Zero campaign and countries have enhanced their nationally determined contributions (NDCs) under the 2015 Paris climate agreement. But there is still a significant gap between ambition and meaningful action. As the Climate Action Tracker’s latest research indicates, current national policies put us on a path to 2.9° Celsius of warming, relative to pre-industrial levels, by the end of this century – substantially above the Paris climate agreement’s goal of 1.5°C.
In this critical decade of climate action, the United Nations climate-change conference (COP26) this November will serve as a litmus test for global ambitions. Make no mistake: the goal of building a net-zero-emissions society by 2050 is indeed ambitious and will be quite challenging; but it is absolutely feasible. According to the International Energy Agency, all of the technologies needed for the necessary cuts in global emissions by 2030 already exist. And for mid-century targets, a McKinsey & Company analysis shows that over 85% of the necessary emissions reductions can be achieved with technologies that are either already mature or in their early adoption phase.
Since energy production and usage accounts for around 73% of global emissions, getting this part of the transition right is our best chance to take a quantum leap toward net-zero. But first we must overcome some obstacles. It is well documented that the costs of renewable energy – specifically solar and wind – have plummeted over the last decade, making renewables the cheapest source of power in more than two-thirds of the world. But if that is the case, why is the energy shift happening too slowly?