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If this is not a call for action, what is?

Clim8 Investment Team

08 April 2022 Climate ChangeSustainable Investing

by Vincent Gilles & Marie Allen

On 4th April, the IPCC released the final report of its current reporting cycle.

Each IPCC reporting cycle consists of the work of 3 working groups that provide a comprehensive meta-analysis of the current science on climate change. The working groups cover: The Physical Science Basis; Impacts, Adaptation and Vulnerability and the third report, released yesterday, Mitigation of Climate Change. 

In simple terms, the first report published in August 2021 focussed on how much climate change has occurred and to what extent human activities are responsible for the effects; the second report (February 2022) grappled with the effects of climate change on a number of systems, including land and water ecosystems, as well as on humans; the final report models focuses on the mitigation pathways are to limit warming to 1.5°C and how we can halt and reverse the physical effects climate change that are shaping our world rapidly and irreversibly. 

The publication of those reports is a major event involving hundreds of scientists split in various working groups covering the Physical Science Basis; Impacts, Adaptation and Vulnerability and the third report, released yesterday, Mitigation of Climate Change. Of course, because all countries signatories to the UN convention  are involved, the last few hours before publication involve a lot of horse trading on wording. Yet this time, the report has a key un-ambiguous message: we are close to the point of no-return and we need to turn our thinking towards mitigation.

The chart below offers a graphic illustration of the various scenarios (90 of them!) reviewed by the experts. In simple terms, we would need to be in the blue zone but we currently are in the red one. 

Taken from the IPCC report, this shows the 4 groups of scenarios outlined by the IPCC. Red is our current trajectory; dark blue shows the pathways that limit warming to 2°C or return it to 1.5°C after a high overshoot; Green shows pathways that limit warming to 2°C with no or limited overshoot; and light blue shows pathways that limit warming to 1.5°C with no or limited overshoot. 

The press reported the key message of the report (‘we can’t carry on like this’) fairly accurately with headlines ranging from ‘Final Warning’ to ‘It’s over for fossil fuels’  to ‘A Vanishing Window’ for Climate Action. 

Perhaps no one is as radical in language as António Guterres, secretary general of the UN, in describing the report as ‘a litany of broken promises… a file of shame cataloguing the empty pledge that put us firmly on track towards an unlivable world.’ He does not fall short of assigning blame to countries, companies and institutions for not only delaying action but obscuring their failed efforts. 

The 6 key scientific messages of the report

  • In order to limit warming to 1.5°C  with little or no overshoot (or to 2°C)  global GHG Emissions need to peak before 2025.1
  • Net Global GHG emissions are projected to fall from 2019 levels by 27% by 2030 and 63% by 2050 in global modelled pathways that limit warming to 2°C. This compares with reductions of 43% by 2030 and 84% by 2050 in pathways that limit warming to 1.5°C. 
  • Current policies will cause GHG emissions to rise past 2025 and lead to global warming of ~3.2°C by 2100.2
  • Pursuing 1.5°C will require coal use to drop by 95%, oil by 60% and gas by 45% by 2050, on 2019 levels. 
  • 90% of global GHG Emissions are covered by climate targets, but only 53% are covered by “direct” climate laws.
  • We cannot afford to continue burning fossil fuels if we want to limit temperatures to 1.5°C. The projected emissions from existing and planned fossil fuel infrastructure (assuming no additional abatement technologies) is equivalent to approximately the carbon budget for 2°C of warming. 
Chart caption: Historical emissions from 1990 to 2019. Emissions of all types and from all sources have continued to increase steadily, with more than two thirds of emissions a direct result of CO2 from fossil fuels and industry. 

Those points can be summarised in a simple way: To meet a 1.5°C Pathway, our current pledges are not good enough. 

We’re all aware of the swathes of ‘net zero pledges’ that poured in prior to and during COP 26 negotiations last November. These pledges cover around 90% of global GHG emissions, yet just 53% of GHG emissions are covered by ‘direct’ climate laws, i.e. ones that outline how and when the cuts to emissions will be made. 

In most reasonable scenarios, even the most ambitious pledges are not getting us to where we need to be. In the IEA’s Announced Pledges Case (if all Net Zero pledges are met in full and on time, a big if), emissions would fall to around 30 Gt in 2030 and 22Gt in 2050.  

And if we only take into account  the more specific policies that are currently in place, emissions would continue to rise to 2030 and remain around this level until 2050. Of course, both of these would exceed temperatures of well above 2°C by 2100. 

So the logical conclusion of the above is: if what was presented as ambitious in Glasgow is actually BAU (Business As Usual), we must do more, a lot more as emissions will certainly not peak by 2025.

OK but what should we do now? Desperation won’t help us much

It could take weeks to get further into the depth of this report, which is technical and outlines scenario upon scenario with an amazing amount of detail on everything from land, to energy to transport.3

Here, we’ll outline what stood out to us as some of the most interesting points and the actions that are most likely to get us back on the path to 1.5°C. So what needs to be done? The report’s and our recommendations are the very similar:

  • Scale up renewables 
  • Phase out coal (and other fossil fuels) 
  • Capture GHG emissions at source and support land-based carbon capture. 

These three points are not the whole story by any means, but they are perhaps the most urgent and allow for the most radical and rapid cuts to emissions. The power sector is not the be all and end all, but it is the most urgent challenge, and past the near term, the remaining fossil fuel CO2 emissions are projected to occur outside the power sector, mainly in transport and industry, where emissions are harder to abate. 

First and foremost is dealing with the power sector. The shift to renewables must triple in speed. 

One of the most optimistic notes in this IPCC report was how the rapid declines in the cost of solar and wind energy (of up to 85% in around ten years), facilitate a much more rapid renewable scale up. In 2020, renewable energy generation rose 7%, and the overall share of renewables in global electricity generation reached almost 29% in 2020, record levels of both growth and overall share. As electricity demand recovers from the pandemic, renewables are being deployed to meet new demand, and renewable energy is now accounting for most of the increased demand that we are seeing. 

Reports by the IEA in 2021, suggested that the rate of renewable deployment in electricity needed to at least double (to 12% growth annually) to reach a 60% share in 2030.

The chart below shows the IEA’s outline of our gap between our historical uptake, the Net Zero pledges case, a case providing for more specific policies and an actual net zero trajectory. The picture is clear, with a Net Zero scenario requiring Renewable scale up more than 80% faster than the main case. As the IEA points out, governments need to do more than address policy and implementation challenges, they need to increase the ambitions themselves. 

 Yet Guterres has upped the bar, stating that renewable uptake needs to triple in order to stay within the limits of this new report. Primary energy from non-biomass renewables needs to increase by 225% on 2019 levels by 2030, according to this latest report, well above what has previously been suggested. 

This is taken from IEA ‘Renewables 2021 – Analysis and Forecast to 2026’.

Phasing out coal – the bulk of the story and yet the scariest part. 

The coal debate within this report is essentially the same as that which we saw playing out at COP 26. Developed countries are happy to commit to a rapid (less than 5 years) phase out of coal, due to them having very little reliance on it. Yet emerging and developing economies are more resistant, with much higher reliance on coal and less integration of lower carbon fossil fuels and renewables. 

A recent (2021) IEA report on coal sees coal phaseout as a longshot in the current situation. India, China and South Asia have all increased their coal consumption over the past few years and aren’t likely to peak until at least 2024, with increases in coal fired power generation ranging from 4.1% in China to 12% in South East Asia.

This IPCC report makes this coal reliance an impossibility on climate terms – in fact the projected emissions of existing and currently planned fossil fuel infrastructure (assuming no new abatement is installed) already push us well beyond the carbon budget we can spend if we want to have a high likelihood of limiting warming to 1.5°C. Existing and planned fossil fuel infrastructure puts us approximately on a path to 2°C, even if we don’t plan any new infrastructure.

Abatement is important – but to be watched 

Many  critics suggest the frequency of references to CCS (Carbon Capture and Storage) is a result of political interference in the final stages of negotiation. There is certainly an element of truth in it in light of the vast amounts of money that Governments and companies are preparing to throw at carbon capture technologies.

CCS can be found as a tagline on the end of paragraphs mandating the need for the end of fossil fuels: ‘We need to end investments in new coal-combustion infrastructure… But it might be ok with CCS.’ This can be seen a number of times in the report, and its half hearted inclusion indicates to me that it’s a politically driven change and one that will likely backfire on us soon. So let’s take this inclusion with a pinch of salt4, but there are some parts worth considering. 

First, carbon capture at the point of combustion remains a nearly criminally underused technology. Unlike Direct Air Capture, capturing emissions from fossil fuel combustion and other industrial and chemical processes is categorised by the IEA as ‘commercially available’ and existing plants can be retrofitted with this technology to capture 90-95% of emissions. This latest IPCC report pointed out that fugitive CH4 emissions continue to be responsible for nearly 6 percent of global GHG emissions. Capturing these at source is a quick and cheap way to tackle a serious and particularly harmful chunk of GHG emissions. 

An article on the IPCC report concludes by pointing out that ‘Until we adopt the principle that anyone producing or selling fossil fuels is responsible for disposal of all the carbon dioxide generated by their activities and products, we aren’t going to stop climate change.’ Legislating and pricing in responsibility for GHG emissions will be absolutely vital to limiting warming, but we can’t wait till 2025 to do it. 

Non-biological carbon capture has been controversial for a while, with activists like Thunberg suggesting it’s only a false solution and must be tightly guarded against. It’s definitely a source of risk when it comes to transitioning, as there’s no logical way that we can avoid reducing emissions by just capturing it, yet its likely to help us abate a small amount of emissions.5

Second, the IPCC report deals with the serious implications of carbon capture of land and ecosystems. Abatement of carbon directly at combustion is a short term easy win, but we need to be investing in the longer term sustainability solutions, one of which is the natural (and much cheaper) means of capturing carbon that we can support in the near term to deliver multiple benefits in the longer term. Protecting peatlands, protecting and reversing deforestation, and general rewilding of inhabited areas, will all offer natural carbon capture alongside the multiples of other ecosystem services they provide – such as natural water storage and purification. 

Let us talk about Money, money, money

We need big money upfront, to deliver economic benefits on a multiple. IPCC pathways that avoid overshoot of 2°C (let alone 1.5°C) all involve much higher up-front transition costs. Yet the IPCC is very clear on the economic benefits that these will deliver, as well as earlier benefits of tackling climate change sooner.

Most of the investment is required in medium and low income regions: they estimate investment needed in the electricity sector of 2.3 trillion USD per year over 2023-2052 to limit temperature to 1.5°C or 1.7 trillion USD per year to limit to 2°C. 

These conclusions don’t account for discount rates – although the models all make it much more cost-optimal to achieve earlier mitigation, which not only reduces negative impacts but reduces reliance on carbon capture and risk of temperature overshoot. 

There clearly is a route to action that we can take but it’s far from easy and it’s even further from what we have been doing. Reconciling the IPCC’s evidence that GHG emissions need to peak by 2025 at the latest to limit warming to 1.5°C, with reports from the IEA from just a year ago (‘We do not expect (unabated) coal to be on track for Net Zero by 2050 pathway by 2024’) shows that there is a serious mismatch between what the evidence is showing us, and what we are doing. 

We can get on the right track, but we need to stop investing in fossil fuels immediately and instead invest in scaling up the solutions we need to actually tackle and reverse climate effects. 


1In the period from 2010 to 2019, the emissions released equate to around four fifths of our remaining carbon budget if we are to limit warming to 1.5°C. 

2The likelihood of limiting warming to 1.5°C has on average declined since the previous IPCC report cycle. GHG emissions have risen since 2017 and recent pathways have higher projected emissions by 2030, higher cumulative net CO2 emissions and slightly later dates for reaching net zero CO2 or GHG emissions. 

3If you’re interested in the findings it’s worth having your own scan (search for key terms to go straight to relevant chapters) or use the many different summaries which have been produced. 

You can search here to find the Full Report and the Summary for Policymakers. 

4CCS is not  a silver bullet, and we  won’t discuss Direct Air Capture (DAC)  further here, as it is not a practical or cost efficient technology at scale as of yet, and while work is ongoing on R&D, our focus needs to remain on energy system decarbonisation far ahead of DAC. 

5Check out this Financial Times video which outlines the pros and cons.