The universal agreement in Paris to limit global warming to 2oC should underpin long term growth in the renewable energy and energy efficiency sectors, says Charlie Thomas, Head of Strategy, Environment and Sustainability.
We believe the climate change pact struck at COP21 in Paris at the weekend represents a sea change in government policy and provides a strong signal to business about the dramatic economic transformation that must take place over the next 30 years in order for it to be achieved.
While there were some shortcomings, the conference went further than any before and sent a strong signal of intent with a unanimous goal of holding global temperatures “to well below 2oC above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5oC”.
One of the most significant outcomes from the conference in my view is the five-yearly review process which requires each country to report on progress in achieving emissions reduction targets and to outline successive emissions reduction objectives. This clearly signals that the current post-2020 emissions reduction pledges are only the start of the decarbonisation journey, and the review mechanism is pivotal given current pledges to cut emissions are only expected to limit a rise in global temperatures of between 2.7oC and 3oC.
From an investment point of view, we believe the deal will be positive for businesses involved in renewable energy and energy efficiency and should underpin momentum in the development of environmental technologies. Furthermore, while carbon pricing was omitted from the final agreement, we expect this mechanism will become increasing important at a local level for incentivising the transition to a lower carbon economy. China is expected to launch an ambitious carbon emissions trading scheme in 2017, for example. This will cover between 3bn and 4bn tonnes of CO2 emission – more than six times the UK’s entire carbon emissions over 2014.
However, we are mindful that the pact does not start until 2020 and we will now be monitoring how the agreement translates into regional policies that promote capital flows into green products and services. Overall, we believe the success of the Paris deal will require significant and sustained investment in green technology and we have seen some compelling forecasts about the pace of this investment in recent months. Prior to the conference, the International Energy Agency estimated that $8tn-$14tn (or some $550bn per year) will be invested in energy efficiency globally by 2035 to meet growing demand and to help achieve decarbonisation goals. Meanwhile, research by Bank of America forecasts that renewable energy will represent some 70%-80% of new power generation between 2015 and 2030 (up from 50% now). This should ultimately increase the use of renewables to roughly 60% of the global energy mix, with fossil fuel use falling to 40%.
Given the timescales involved, the deal is unlikely to have an immediate impact on the fossil fuels industry. However, for the Paris goal to be met an estimated 80% of the world’s fossil fuels will need to be phased out over the next 30 years, and the risk premium associated with “stranded assets” is likely to grow once the agreement comes into force in 2020.
This commentary is for informational purposes only and is not investment advice. The views expressed are those of the author at the time of writing (December 2015) and are not necessarily those of Jupiter as a whole and may change in the future. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested.
Issued by Jupiter Asset Management Limited which is authorised and regulated by the Financial Conduct Authority. No part of this document may be reproduced in any manner without the prior permission of Jupiter Asset Management Limited.
A Good Look At How Homes Will Become More Energy Efficient Soon
Everyone always talks about ways they can save energy at home, but the tactics are old school. They’re only tweaking the way they do things at the moment. Sealing holes in your home isn’t exactly the next scientific breakthrough we’ve been waiting for.
There is some good news because technology is progressing quickly. Some tactics might not be brand new, but they’re becoming more popular. Here are a few things you should expect to see in homes all around the country within a few years.
1. The Rise Of Smart Windows
When you look at a window right now it’s just a pane of glass. In the future they’ll be controlled by microprocessors and sensors. They’ll change depending on the specific weather conditions directly outside.
If the sun disappears the shade will automatically adjust to let in more light. The exact opposite will happen when it’s sunny. These energy efficient windows will save everyone a huge amount of money.
2. A Better Way To Cool Roofs
If you wanted to cool a roof down today you would coat it with a material full of specialized pigments. This would allow roofs to deflect the sun and they’d absorb less heat in the process too.
Soon we’ll see the same thing being done, but it will be four times more effective. Roofs will never get too hot again. Anyone with a large roof is going to see a sharp decrease in their energy bills.
3. Low-E Windows Taking Over
It’s a mystery why these aren’t already extremely popular, but things are starting to change. Read low-E window replacement reviews and you’ll see everyone loves them because they’re extremely effective.
They’ll keep heat outside in summer or inside in winter. People don’t even have to buy new windows to enjoy the technology. All they’ll need is a low-E film to place over their current ones.
4. Magnets Will Cool Fridges
Refrigerators haven’t changed much in a very long time. They’re still using a vapor compression process that wastes energy while harming the environment. It won’t be long until they’ll be cooled using magnets instead.
The magnetocaloric effect is going to revolutionize cold food storage. The fluid these fridges are going to use will be water-based, which means the environment can rest easy and energy bills will drop.
5. Improving Our Current LEDs
Everyone who spent a lot of money on energy must have been very happy when LEDs became mainstream. Incandescent light bulbs belong in museums today because the new tech cut costs by up to 85 percent.
That doesn’t mean someone isn’t always trying to improve on an already great invention. The amount of lumens LEDs produce per watt isn’t great, but we’ve already found a way to increase it by 25 percent.
Maybe Homes Will Look Different Too
Do you think we’ll come up with new styles of homes that will take off? Surely it’s not out of the question. Everything inside homes seems to be changing for the better with each passing year. It’s going to continue doing so thanks to amazing inventors.
ShutterStock – Stock photo ID: 613912244
IEMA Urge Government’s Industrial Strategy Skills Overhaul To Adopt A “Long View Approach”
IEMA, in response to the launch of the Government’s Industrial Strategy Green Paper, have welcomed the focus on technical skills and education to boost “competence and capability” of tomorrow’s workforce.
Policy experts at the world’s leading professional association of Environment and Sustainability professionals has today welcomed Prime Minister Teresa May’s confirmation that an overhaul of technical education and skills will form a central part of the Plan for Britain – but warns the strategy must be one for the long term.
Martin Baxter, Chief Policy Advisor at IEMA said this morning that the approach and predicted investment in building a stronger technical skills portfolio to boost the UK’s productivity and economic resilience is positive, and presents an opportunity to drive the UK’s skills profile and commitment to sustainability outside of the EU.
Commenting on the launch of the Government’s Industrial Strategy Green Paper, Baxter said today:
“Government must use the Industrial Strategy as an opportunity to accelerate the UK’s transition to a low-carbon, resource efficient economy – one that is flexible and agile and which gives a progressive outlook for the UK’s future outside the EU.
We welcome the focus on skills and education, as it is vital that tomorrow’s workforce has the competence and capability to innovate and compete globally in high-value manufacturing and leading technology.
There is a real opportunity with the Industrial Strategy, and forthcoming 25 year Environment Plan and Carbon Emissions Reduction Plan, to set long-term economic and environmental outcomes which set the conditions to unlock investment, enhance natural capital and provide employment and export opportunities for UK business.
We will ensure that the Environment and Sustainability profession makes a positive contribution in responding to the Green Paper.”