Energy needs to change – fast
The usual decision-making cycles are not equipped to prevent runaway climate change.
If we’re going to limit irreversible damage to the planet – and build resilience to cope with our changing world – the decisions we make today will be absolutely definitive. And nowhere is that more true than in the energy industry.
Already, we are more than 15% through the “Decade of Action” declared by the United Nations to meet its Sustainable Development Goals. And in the last century, global temperatures have shifted further – and much faster – than during the recent ice ages, but in the opposite direction.
Since the industrial revolution, carbon dioxide in the earth’s atmosphere has increased by around 130 parts per million (ppm); from around 280 ppm to 410 ppm today.
With the energy sector currently accounting for two thirds of year-on-year increases in emissions, rapid change in the energy sector is needed if we are to avoid the 450 ppm limit required to restrict global warming to 2 ℃.
So far, the pace of change is insufficient – meaning we could quickly be faced with the reality of a runaway climate.
It’s time to seize opportunities
With promising technologies and shareholder-backed action, energy is changing – just too slowly.
Although the situation is serious, there are signs that the industry is ready for change. Several large industrials in The Netherlands have recently brought forward their climate goals to meet new, more challenging deadlines.
This shift is being dictated by more than just regulation. Recent activist shareholder votes at both Chevron and Exxon Mobil have shown investors are impatient for a faster pace of transformation. And increasingly, pensions and other key funds are taking account of companies’ physical and transitional climate risk.
A few important areas where Royal HaskoningDHV sees that huge investments are driving innovation include:
- Decarbonization of industry
- Energy transport networks
- Renewable power generation
With tens of billions of Euros behind them, these important areas of the energy transition are likely to leap forward over the coming decade.
There’s also enormous untapped potential to dramatically reduce energy use in almost every walk of life. We can save power in everything from boiling an egg in an open pan, to lighting homes and workplaces – where even now, low-energy LEDs represent less than half of the global market.
The problem is, the tempo of change is still too slow. The industry seems unsure who should “own” climate change as an issue, meaning responses are often too piecemeal to be effective. Looking across the market, I see few, if any boards with Chief Climate Officers.
Ambitious targets are great. But meeting them will take a fundamental shift in thinking.
Climate data is the key
The rapid global response to the COVID pandemic has shown how adaptable humanity can be. As a species, we are well equipped to respond to immediate danger – and implement sweeping changes when they’re required.
But climate change is a different kind of threat. It’s a slow, relentless enemy that steadily accrues damage over time. That makes it appear less urgent than other issues with clearer deadlines. For a business and society as a whole, that makes it difficult to prioritise.
Similarly, incremental change can lead companies to accept circumstances that would once have seemed extreme. Climate-related natural disasters are growing in frequency but, because the change is gradual, many organisations accept them as an inevitable cost – instead of re-evaluating their exposure to climate risk and building resilience where needed.
To add to this inertia, businesses can face “choice paralysis” due to the number and complexity of potential solutions. With so many interrelated factors, it’s hard to know which option to choose.
This is especially true in climate resilience. If – as seems likely – global warming goes beyond 2 ℃, potential chain reactions make it difficult to predict future conditions. The resulting uncertainty serves to delay decision making still further.
In this context, the right climate data and systems can make all the difference. Gaining a coherent, real-time understanding of the latest information, can make decisions that much clearer, and unlock the positive action we all need for the future.