The ongoing Californian wildfires have caused a visible haze in the east coast skies of the United States – an alarming reminder of the adverse environmental conditions arising from climate change. In California, soil and vegetation has been dried out, the rainy season shortened, the Santa Ana winds shifted, and the jet stream slowed, leading to exacerbated wildfires. Other climatic changes and consequences can be expected elsewhere, and while there has been both investment in sustainable sectors from companies and innovative ideas from policymakers, it is not enough to avoid a global temperature increase beyond 1.5 °C.
Recent years have seen a great volume of global activity, from both the private and public sectors, aimed at limiting the rise in global temperature to 1.5 °C or 2.0 °C. Bloomberg New Energy Finance (“BNEF”) reports that in 2017 more clean energy was commissioned than ever before (a record 160 GW of clean energy generating capacity, excluding large hydro, globally) and expects global investment in clean energy in 2018 to be similar to that of 2017. Total installed capacity of wind and solar PV, as of August 2018, has grown 65-fold since 2000, and more than quadrupled since 2010. Other environmental sectors are set to experience similar rates of growth in the future. McKinsey’s electric vehicle adoption base-case scenario suggests that there could be a 15-fold growth in electric vehicles, from an estimated 8 million in 2020 in China, the EU and the United States to around 120 million electric vehicles by 2030 (a compound annual growth rate of around 130%). The energy and transport sectors, as well as other industries, are witnessing a substantial number of firms re-directing, and launching, efforts in order to support sustainable endeavours.
Meantime, in March 2018, the European Commission’s DG Fisma (the Financial Stability, Financial Services and Capital Markets Union Directorate-General) released its ambitious report ‘Action Plan: Financing Sustainable Growth’. Its proposals revolve around increasing clarity in the sustainable finance sector with proposals such as: establishing a unified sustainable finance taxonomy; formulating EU green finance labels; further defining institutional investor and asset manager sustainability duties; and furthering corporate reporting transparency. If all these proposals are implemented, capital inflows into sustainable finance activities in the EU can only increase as investors are better able to benchmark, report on, and manage the climate-related risks and returns of their investments.
While these activities are positive, they are insufficient. The IPCC’s Special Report on ‘Global Warming of 1.5 °C’, released in October 2018, has famously highlighted that “limiting global warming to 1.5 °C… require[s] rapid, far-reaching and unprecedented changes in all aspects of society”; global net human-caused CO2 emissions would need to fall by about 45 percent from 2010 to 2030. The implications of inaction are startling – if temperatures rise by 2.0 °C, tropical coral reefs will disappear, and even at 1.5 °C, we are likely to see a 70-90 percent decline in them, while 8 percent of plants, 6 percent of insects, and 4 percent of vertebrates are projected to lose over half of their climatically determined geographic range (rising to 16 percent, 18 percent, and 8 percent respectively at 2.0 °C).
The report also contains a number of scenarios setting out different routes to limiting the global temperature rise to 1.5°C. The lower the reduction in CO2 emissions in the short-term, the greater the CO2 removal from the atmosphere required in the long-term (for instance, using bioenergy with carbon capture storage schemes as well as changing land use practices, the former of which assumes the use of technology yet to be proven at scale).
Regardless of the specific scenario, meeting a 1.5 °C limit requires a massive increase in investment in sustainable practices. An article issued earlier this year in Nature Energy (note: prior to the IPCC Special Report) – estimated that an extra $458bn of investment in the low-carbon economy is required globally per year, for the next 12 years, to meet a 1.5°C limit. Six of the ten most destructive wildfires on record in California have occurred in the past three years – if supranational organisations, states, companies and the public do not take drastic actions now, the consequences will be even more dire later.