Download - The End of Business-As-Usual?
The End ���of Business-As-Usual?
Dr. Johannes Meier European Climate Foundation
The end of BAU?���4 Perspectives
1. Climate Science 2. Asset Valuation
3. Political Will 4. Transition Management
The end of BAU?���4 Perspectives
1. Climate Science 2. Asset Valuation
3. Political Will 4. Transition Management
The Skep(cs
4 Types of Skep(cs 1. Climate change is not happening
2. Humanity’s contribu(on to climate change is not significant
3. We cannot mi(gate climate change effec(vely
4. It is too costly to mi(gate climate change
Image credit: James Lawrence Powell, MIT
Climate Science Firming Up
Source: climateactiontracker.org
PaHern ShiI: Global Warming, Rising Risks
HIGH-CARBON ECONOMY “On track to 6 degrees” (IEA)
CHANGING RISK PATTERNS - Weather - Oceans - Food - Security - Health
Mitigation LOW-‐CARBON ECONOMY -‐ Decarbonizing power -‐ Resource efficiency -‐ Smart ci(es -‐ Forests/land use
Adaptation PAYING FOR CONSEQUENCES -‐ High costs of delay of mi(ga(on -‐ Stranded assets -‐ Tipping points
PaHern ShiI: Global Warming, Rising Risks
Source: Swiss Re
Source: Swiss Re
Insured Losses from Climate-‐Related Disasters, 1970-‐2011
If “Frankenstorm” is happening at 0.8°C warming, what might 3°C, 4°C, or 6°C warming bring?
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The end of BAU?���4 Perspectives
1. Climate Science 2. Asset Valuation
3. Political Will 4. Transition Management
Emissions Underlying Financial Flows
Source: Carbon Tracker report: Unburnable Carbon 2013
Fossil fuel carbon budget 2013 – 2050 (GTCO2)
Scenario Maximum temperature
rise
50% probability
80% probability
Pessimis(c 2°C 886 500
Op(mis(c 1.5°C 525 -‐
2°C 1075 900
2.5°C 1275 1125
3°C 1425 1275
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Stress Tes(ng with Carbon Budgets
Source: Carbon Tracker report: Unburnable Carbon 2013
Listed reserves are a quarter of all known fossil fuel reserves Current listed reserves (762GtCO2) far exceed a quarter of the total carbon budgets but could double (1541GtCO2) If we break the 2°C budget, we very quickly hit 2.5°C and 3°C
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Poten(al listed reserves Current listed reserves
Carbon Budget Deficits for Listed Companies
Source: Carbon Tracker report: Unburnable Carbon 2013
Stranded Assets?
The end of BAU?���4 Perspectives
1. Climate Science 2. Asset Valuation
3. Political Will 4. Transition Management
Key Uncertainty: Poli(cal Will
Poli(cal Will
Think Tanks Environmental Advocates
Na(onal Interests
Elec(on Cycles
Governance Capabili(es
Media Dynamics
Cultural Memes
Ideologies
Economic Factors
Global Factors
BAU Lobbies
Progressive Industry
Policy Frameworks -‐ 20/20/20 Targets
-‐ EU 2050 Energy Roadmap -‐ EU Climate Roadmap -‐ EU ETS Direc(ve -‐ EU EE Direc(ve -‐ UK Green Deal
-‐ GER Energiewende etc.
Think Tanks Environmental Advocates
Na(onal Interests
Elec(on Cycles
Governance Capabili(es
Media Dynamics
Cultural Memes
Ideologies
Economic Factors
Global Factors
BAU Lobbies
Progressive Industry
ECF/Mercator Addressing Convergence and Coherence Challenge with Agora Energiewende
2 goals: • Prepare ground to ensure that policymakers take decisions needed to set the course toward full decarbonisa(on
• Enhance understanding of the Energiewende and help stakeholders views to converge, thereby minimising space for vested interests
The Council of Agora
28 Members
Martin Iffert CEO Trimet Aluminium
Stefan Kapferer State Secretary Ministry of Economics
Mechthild Wörsdörfer Head of Unit EC DG Energy
Jochen Hohmann President Bundesnetzagentur
Vera Brenzel Vice President Electricity E.ON
Lucia Putrich (CDU) Minister for Environ- ment Hesse
Matthias Machnig (SPD) Minister for Economy Thuringia
Boris Schucht CEO 50Hertz
3 meetings so far 05-09-2012 21-11-2012 20-02-2013
Ottmar Edenhofen PIK
The end of BAU?���4 Perspectives
1. Climate Science 2. Asset Valuation
3. Political Will 4. Transition Management
Key Challenges for Transi(on Management
Level and quality of market integraMon • Na(onal, EU, global • Gas, electricity markets • Flexibility/capacity
markets
Feedstock price development • Shale gas, LNG • Unconven(onal oil
Technology development • Cost curves • Centralized &
decentralized architectures
• Convergence energy & IT systems
Public acceptance • Technologies • Infrastructure • Markets • Retail energy prices
Economics • Market designs and
subsidies • Internalisa(on of
externali(es (carbon taxes/carbon price)
• Capital flow constraints
A Framework for Transi(on Management
Backcasting
Desirable future • Competitiveness • Sustainability • EU2050
international role
Constraints • Installed base • Contracts • Business models • Mindsets
Forecasting
Balancing • Resilience • Optionality • Intelligence
Where do we want/need to be in 2050, in 2030?
New Metrics for Dynamic, Complex, Unpredictable, and Risky Environments
1. Resilience
2. OpMonality
3. Intelligence
• Energy systems to withstand shocks (including worst-‐case scenarios in calculus)
• Future proofing design and loca(on of assets • Bias towards diversity
• Adding assets in smaller increments • Avoiding lock-‐in • Hedging outcomes • Reducing capital intensity
• Staying on top of cost curves • Harnessing of big data (Industrial Internet) • Learning plaoorms
Based on M. Liebreich: The new energy ROI
Finding Orienta(on in a Principled Approach
1. EU global leader in transiMon to low-‐carbon economy
2. Energy system led by RES
3. Industrial policies to address compeMMveness challenge
• Ambi(ous and binding 2030 targets
• Integrated EU market and financial union
• Investments in flexibility and energy efficiency
• Avoiding fossil-‐fuel lock-‐in
• Sectoral differen(a(on • Innova(on incen(ves • Easing transi(on costs
The end of BAU!
1. Climate Science 2. Asset Valuation
3. Political Will 4. Transition Management
Further Links Interpre(ng climate science and media reac(ons hHp://klimafakten.de/ hHp://www.carbonbrief.org/
Carbon bubble hHp://www.carbontracker.org/carbonbubble hHp://www.carbontracker.org/wp-‐content/uploads/downloads/2013/03/SnPCT-‐report-‐on-‐oil-‐sector-‐carbon-‐constraints_Mar0420133.pdf
Poli(cal will hHp://ec.europa.eu/energy/index_en.htm hHp://www.agora-‐energiewende.de/
Transi(on management hHp://about.bnef.com/blog/liebreich-‐the-‐new-‐energy-‐roi-‐resilience-‐op(onality-‐intelligence/ hHp://roadmap2050.eu/