‘Peak meat’: Why investors are predicting global emissions reduction will outpace current climate plans
But stakeholders need to come together to push for more drastic climate action to limit global waming to a safer 1.5C, investor group warns
Last week’s report from the International Energy Agency (IEA) made for sobering reading, with its warning that the world is still headed towards global temperature rises that are set to breach the goals of the Paris Agreement – even if all existing national climate plans are delivered as promised. But a report out this morning offers a brighter outlook on the planet’s future, arguing a sub-2C warming trajectory may be more likely than current national decarbonisation targets indicate.
The Inevitable Policy Response report, published this morning by the Principles for Responsible Investment – a UN-backed coalition of global investors – predicts there will be a rapid climate policy acceleration over the next four years that will ultimately put the world on track to keep global temperature increases below 2C. It argues that “forceful actions” taken over the coming years could result in emissions falling by 80 per cent by 2050, with energy and land use emissions falling by 75 and 125 per cent respectively.
The analysis argues that between 2023 and 2025, clean technology costs will continue to fall, pressure on governments will grow as climate-related weather events become increasingly obvious and acute, and countries will work to significantly strengthen their decarbonisation plans ahead of the submission of the third round of national climate pledges under the Paris Agreement. It contends that all of these factors will drive a significant escalation of climate policy that could put the world on a safer pathway than indicated by countries’ current climate goals.
The analysis, which draws on insights from hundreds of policy experts and cutting edge economic analysis exploring the future of energy and land use, forecasts that by 2030 wind and solar generation will treble and the percentage of zero emissions vehicles on roads will rise to command a 30 per cent share of the global fleet. It also predicts rapid changes in food and land systems, calculating that 400 million hectares of pasture and rangelands will be replaced with forests, cropland, and nature-based solutions globally by 2050, ensuring land once again becomes a net CO2 sink. Meat consumption, meanwhile, is expected to peak by 2030 globally, the report predicts, before then declining as sustainable alternatives to animal products become cost competitive by 2035.
But despite the encouraging tidings set out in the report’s ‘forecast policy scenario’ the PRI has simultaneously warned that far more ambitious policy action would be required to cap global temperature rises at 1.5C above pre-industrial levels, the Paris Agreement’s more stretching limit which scientists have warned is necessary to prevent the most dangerous climate impacts. To put the world on a safer course, policymakers need to significantly ramp up their climate ambitions, and financiers need to gear up to bankroll the rapid deployment of low carbon infrastructure.
The PRI contends that to reach net zero emissions by 2050, deforestation needs to be halted, ideally by 2025; unabated coal power has to be eliminated in most advanced economies, including China, by 2035; fossil fuel cars need to be phased out in almost all markets by 2040; and the whole world needs to transition to 100 per cent clean power by 2045.
The analysis notes that limiting warming to 1.5C requires a significant ratchet in policy action across a number of major regions, including the United States, China, Brazil, and India. It also warns that accelerating public and private financing flows to developing countries to enable the transformation of their energy industries and land use will be critical to achieving a net zero economy. “Achieving 1.5C requires rapid change on a truly global level,” the report concludes.
Jakob Thomae, managing director at the 2° Investing Initiative, branded the report as both a “cause for hope and a call to action”, noting that it highlighted how the Paris Agreement goals remained in reach, but only with sweeping cfhanges in energy and land use. “This will require concerted action by government and the financial industry to shift regulation and financial flows to help close the gap to 1.5C,” he added.
The PRI has touted the Inevitable Policy Response report as the first ever roadmap for the policies needed across both the energy and land use systems to hold temperature increases to 1.5C, stressing that while its ‘required policies scenario’ was similar to the ‘net zero emissions’ scenario featured in last week’s IEA’s World Energy Outlook it also featured more extensive analysis of the changes needed across food and land systems.
Fiona Reynolds, CEO of the PRI, said the report was an important tool that would help investors shift capital markets and corporations towards sustainable outcomes over the coming years.
“IPR scenarios for investors encompass both the large-scale market shifts to come in carbon, energy and land use as well as invaluable granular analysis to help guide investment directions,” she said. “The 2021 IPR forecasts signal to investors that they must focus on the transition, 2030 and net zero pathways and the investment opportunities emerging as policy makers respond to growing climate challenges.”
The PRI said it would now work with major asset owners – including BlackRock, BNP Paribas, and Nuveen – to work out how data from the Inevitable Policy Response report could be used by asset owners and managers to both advance investment in the sustainable economy and avoid stranded asset risks.
Ashley Shulten, head of ESG investment global fixed income at BlackRock, explained that the detailed policy forecasts in the report would help the market “conceptualise the key changes that could occur in energy and land systems across the world if the forecasted climate policy acceleration occurs”.
She added that the investor was looking forward to working with the PRI and other financial players to “further hone the data and analytics that will be most helpful in constructing these scenarios and making informed investment decisions”.
As with last week’s flagship report from the IEA, there is clearly cause for both celebration and concern in the findings published today by the PRI. While there is evidence the Paris Agreement’s rachet mechanism is working, it is also obvious that much more needs to be done to avert the worst impacts and most costly effects of climate change.
The 2C future predicted by the PRI is infinitely better than a the 2.6C pathway that the IEA believes will be delivered by current policies, but it still points to climate impacts that would wreak havoc on the global economy and destroy the homes and livelihoods of millions of people around the world. While increasingly frequent and violent extreme weather events and the increasingly compelling economics of clean technologies are clearly set to bolster climate policy, it is clear policymakers must push the envelope as much as possible if they are to drive down emissions from energy and land use at a pace that deliver on the promise of the Paris Agreement.
