When I worked as a division director in the United Nations Environment Program (UNEP), Kofi Annan visited our headquarters in Nairobi from time to time. In one of his last visits before stepping down as Secretary General, Kofi regretted that the UN had not been able to produce a climate policy in line with the advice from their own scientists. Since then the gap between what scientists recommend and current policy has continued to widen throughout the whole period his successor Ban Ki-Moon.
This year we will finally have reached a global agreement that if fully implemented will save the world from the most dangerous climate changes. The Paris Climate Agreement entered into force on 4 November 2016. Its aim is to keep global temperatures rise this century well below 2˚C above pre-industrial levels, and to pursue efforts to limit the increase even further to 1.5˚C.
The challenge of achieving these goals should not be underestimated. The figure here shows emissions from 1850 up to now, and the reductions pattern needed to give us a 50% chance of not exceeding 2˚C. The curve to achieve the lower 1.5˚C target would be even steeper.
Stranded assets – the end of fossil fuel business
The most dramatic consequence of the agreement is its impact on the fossil energy business. If we are to limit global warming to 2˚C with a fair probability of success then the proven coal, oil and gas reserves owned by the fossil-fuel companies are five times larger than the carbon budget we have left to burn.
If the big oil and coal companies aren’t able to pump out their reserves to avoid wrecking the climate, the value of their companies would plummet. John Fullerton, a former managing director at JP Morgan, calculated in 2012 that the market value of proven global fossil fuel reserves was about $27 trillion. These assets are physically in the ground but financially already accounted for in asset books. It looks like we can have a healthy balance sheet in big oil and coal, or a relatively healthy planet – but we cannot have both.
Even if a majority of big oil and coal companies do not agree on the scenario above and dispute the conclusions, more and more investors require a stranded asset risk assessment from the fossil fuel industry – and a growing number are divesting from their coal and oil portfolios. The value of investment funds committed to selling off fossil fuel assets has jumped to $5.2tn at the end of 2016, doubling in just over a year.
The figure here shows how many years we have left with the current (2016) Green House Gas emissions if global warming is to be limited to 1.5˚C, 2.0˚C, and 3˚C given various likelihoods of reaching the goal. In only four years we will pass the point where there is a 50% chance to limit the warming to 1.5˚C.
The green shift – a tremendous business opportunity
To reach the climate goals set in the Paris Agreement we need to reach a zero emission world by 2050. The good news is that the private sector now has the technology and cost efficiency needed to provide the low emission goods and services needed to achieve this.
In 2016 we have seen electric cars taking a growing share of the market, and the cost of generating electricity from solar and wind fall to a level where it is on par with that of coal, oil, or natural gas. The bad news is that the speed of the shift from fossil to renewable energy is still way behind what is needed to reach global climate goals.
One of the reasons is that the subsidising of fossil energy is four times higher than for new renewable energy sources. Even if the green business sector is competitive the market alone will not solve the climate problem. Only bold politicians that produce the climate policy needed will bring us where we need to go. Obviously renewable energy must be so much cheaper than fossil fuel alternatives that the green shift accelerates to a sufficient speed. Today there is no financial cost to polluting the atmosphere with Greenhouse Gases (only the cost that we all pay, in the long run.) With the use of the “polluter pays” principle and incentives for the growth of green businesses we might still be able to reach the goals, and in the process trigger the creation of millions of new greener jobs.
IRENA, the International Renewable Energy Agency, predicts that there will be 24 million jobs in clean energy by 2030 from 8.1 million in 2015, driven to a large degree by efforts to meet carbon reduction targets agreed on in Paris.
The next 5-10 years will show us if the world is strong enough to follow the path outlined in the Paris agreement or surrender for short sighted profit-making.
A Climate Challenge to the Cruise Industry
Implementation of the Paris agreement will also have an impact on the cruise industry. Cruise liners that so far have taken no measures to reduce their CO2 footprint emit almost twice as much CO2 per passenger as a long-haul flight. The cruise market is expected to expand in the years to come, and business as usual in regards to CO2 emissions is not sustainable.
Expected shipping regulations aimed at reducing emissions combined with increasing passenger awareness, and a desire to travel green, represents a challenge to to the cruise market. If the world is going to fulfill the goals set in the Paris agreement, and global warming is to be limited to less than 2˚C, then the front-runners in the green shift in the cruise industry are positioned to be the future market winners.
About the author
Mr. Svein Tveitdal is a civil engineer with extensive experience from the private sector and the UN. In 1989 Svein was the founder of the Environmental Centre GRID-Arendal in Norway that is affiliated with the United Nations Environment Program (UNEP). After acting as director for almost 10 years, he joined UNEP as a division director at their headquarters in Nairobi. After leaving UNEP he started his own company, Klima2020, and also served seven years as the Environmental Ambassador to the city of Arendal, Norway.
He has served as chairman or board member in numerous private companies and public institutions. Svein's current focus is on bridging the gap between science, policy makers and the broad public to facilitate understanding of the threats and opportunities climate change poses. He is a writer, lecturer and active social media user with more than 200,000 followers on Twitter (@tveitdal). He typically communicates what is happening globally with climate change and renewable energy including the Arctic and Antarctica.
On board MS Midnatsol, Svein will give three lectures about the history of climate change, as well as the latest status on human-made global climate change and its impact, with a particular focus on the melting ice in the Arctic and Antarctica. He will talk about the Paris climate agreement, solutions and action needed, and discuss the chances we have to limit global warming to a level that will prevent the world from climate disaster. He will also talk about the threats and opportunities the green shift is posing on the business sector and the public.