‘The Paris Effect’: Study predicts key clean technologies nearing market ‘tipping points’
Major analysis from SYSTEMIQ argues that rapid uptake of clean technologies could leave high carbon infrastructure stranded within a decade
The Paris Agreement has triggered a wave of clean tech innovation that is set to trigger a series of market tipping points over the next 10 to 15 years that is likely to leave billions of dollars-worth of high carbon infrastructure stranded.
That is the conclusion of a new analysis from global sustainability consultancy SYSTEMIQ, which predicts that a wide range of clean technologies will become cost-competitive with polluting incumbents over the next decade.
The report – titled The Paris Effect – COP26 edition – argues there is “no longer a meaningful case for investing in new carbon-heavy infrastructure, with all major sectors well capable of developing cost-competitive green solutions by 2030”.
“For any high-carbon infrastructure built today, the revenues from 10-years out should be seriously questioned,” it said, adding that the world could see market tipping points in sectors representing 90 per cent of emissions by 2030 and all emissions by 2035.
The report details how low-carbon solutions are competitive across much of the electricity sector and are on track to become similarly competitive in multiple sectors including trucking, food & agriculture, aviation, shipping and others by the 2030s.
The development of clean technologies in these hard to abate sectors is expected to be further accelerated by the Glasgow Breakthrough agreement at COP26 this week, which saw 40 countries commit to accelerating the development of a wide range of clean technologies, and the launch yesterday of the First Movers Coalition, which brought together a raft of leading multinationals to co-ordinate increased demand for emerging low carbon products such as green steel, electric trucks, and sustainable aviation fuels.
Rachel Kyte, Dean at the Fletcher School at Tufts University, said the report provided further evidence that investors in high carbon infrastructure were taking a considerable gamble. “As the old saying goes, if you want to lose a bet, bet against the future,” she said. “Investing in high-carbon infrastructure now is that losing bet. For any infrastructure asset built today that serves a high-carbon value chain, the revenues from 10-years out should be seriously questioned. Infrastructure investors should also pay close attention to reinforcing downward spirals that will accelerate the decline of high-carbon assets.”
The report painted a broadly positive picture around clean tech adoption rates, but it also warned that while progress is accelerating in areas such as renewables, electric vehicles, plant-based meats, and green steel, the pace of change sectors such as energy efficiency, heat pumps, nature-based solutions and direct carbon removal remains too slow.
The warnings echo similar conclusions from the International Energy Agency yesterday, which published a report detailing how the deployment rates for the vast majority of clean energy technologies are not in line with delivering net zero emissions by 2050.
The SYSTEMIQ report also suggests the market is starting to recognise the increased stranded asset risks faced by high carbon projects, highlighting how borrowing costs for long-cycle oil developments are now over 20 per cent, compared to three to five per cent for renewable power investments. Similarly, the spread in cost of capital for hydrocarbon versus renewable developments has widened by 10 percentage points in the last five years, in favour of renewables.
Christiana Figueres, co-founder of Global Optimism and former UN climate chief, said the report provided further evidence the Paris Agreement was working. “The direction is set for this decisive decade – we will not step back from decarbonisation efforts to stay within the 1.5C limit,” she said. “Substantial progress has been made since the Paris Agreement, and we will soon see the curve of emissions beginning to go downward. SYSTEMIQ’s updated report, The Paris Effect – COP26 edition, shows us that the transformation of key sectors is happening, and that with increasing speed, we can create a virtuous cycle for policy, technology and finance.”
