A new landmark report by the Intergovernmental Panel on Climate Change (IPCC) sets out what needs to happen in order to halve global GHG emissions by 2030.
This is the third part of the IPCC’s sixth assessment report – it follows last year’s report on the physical science base and the report on climate change adaptation published in February.
For the first time, the IPCC’s analysis looks at the ‘demand side’ factors driving current activities that result in greenhouse gas emissions and what will determine the success of alternative policies as well as looking at where cross-sector action. The report also considers how to ensure innovations and investments at national level can be transported across borders and contribute to the global effort to tackle climate change.
The report is the work of 278 authors from 65 countries – who then reviewed 59,212 expert and government comments – before the report was approved at a meeting involving representatives of 195 governments (including China, Russia and India) on Sunday 3rd April. The approval meeting is understood to have overran, with media reports suggesting that certain individual governments were pushing for certain aspects of the report to be revised. So, while this may cause speculation that the scientific assessments would otherwise have been even stronger, we can be sure that the published report represents a consensus that has been agreed by all UN member states.
Key conclusions
The report is set against the context of rising net global GHG emissions – although the pace of the increase has fallen since 2010. Although there have been emissions reductions associated with reduced fossil fuel use and improved industrial processes, these have been less than increases in emissions associated with increased human activity in that time period.
There are significant regional and geographical variations in emissions. For example, the report notes that the 10% of households with the highest share of per capital emissions contribute disproportionately to total global household emissions. However, there are examples that show sustained reductions are possible, with 18 countries having sustained emissions reductions lasting longer than 10 years.
Some notable findings of the report include a conclusion – agreed by all 190 Governments that participated – that there needs to be a “substantial reduction” in fossil fuel use by 2030 and that removing greenhouse gasses from the atmosphere through Carbon Capture & Storage, while necessary, is not an alternative to action in other sectors.
The report emphasises that action in the next few years is critical – the world will not maintain global temperatures below a rise of 1.5°C unless short-term targets are met. Even if these targets are met, there is still a risk that global temperatures will temporarily go above these thresholds, but by meeting these targets, there is more chance they will then come down by the end of the century. Global temperatures will only fully stabilise when Net Zero is achieved.
The IPCC report also concludes that these proposed actions can contribute to the achievement of wider UN Sustainable Development Goals – in particular through increased employment opportunities, improved health and wellbeing and reduced exposure to flood and extreme weather risk.
Actions required
The focus of the report is on action that will need to be taken to halve GHG emissions by 2030 – with action needed urgently in all these areas. The report focusses in particular on:
- A major transition in the energy sector - requiring a substantial reduction in fossil fuel use, widespread electrification, improved energy efficiency, and use of alternative fuels (such as hydrogen)”
- Lifestyle and behaviour change - supported by the right policies, infrastructure and technology, with a particular focus on energy efficient buildings. The report notes that this can also benefit health and wellbeing.
- Reduced emissions in cities and urban areas – achieved by reducing energy consumption through actions on demand for transport (especially creating compact, walkable spaces), electrifying transport in combination with other efficient energy sources in the short-to-medium term (such as sustainable biofuels) and also developing nature-based carbon uptake and storage
- Reducing emissions in industry, which accounts for a quarter of global emissions – using materials more efficiently and reducing waste, alongside adoption of low-carbon alternatives for steel, building materials and chemicals (where a number of low GHG production processes are in pilot or near-commercial phase)
- Agriculture, forestry and land use – in these activities, there is a need to both reduce emissions and implement new carbon capture solutions (but this activity will not compensate for delayed action in other sectors). Although carbon removal will be needed for the ‘hard-to-abate’ activities, considerably more action is needed to address feasibility restraints, especially for the largest scale projects being considered.
The report includes list of technologies/mitigations that are considered to have reached a good level of feasibility and are generally supported by the public, so as to be deployable in almost all countries and regions - solar energy, wind energy, electrification of urban systems, urban green infrastructure, energy efficiency, demand side management, improved forest- and crop/grassland management, and reduced food waste and loss. However, the report does note that even these need to be carefully managed to ensure they do not have negative impacts on biodiversity.
The report emphasises the need for actions to extend beyond individual businesses, economic activities and cities – the proposed strategies will only be effective is combined with actions across value chains and through the full supply chain.
Financial Flows and Investment
The report concludes that there is sufficient capital and liquidity in global markets to close the investment gaps. The report concludes that – without accounting for the economic benefits of reduced adaptation costs and reduce climate-related disruption – GDP would be “just a few percentage points lower” if the actions proposed in the report were taken, compared to the current policy framework.
However, it emphasises that stronger policy signals are needed, with closer alignment in particular between public sector finance and policy:
- The report highlights a number of challenges that need to be addressed within the financial sector – including inadequate assessment of climate-related risks and investment opportunities; regional mismatch between available capital and investment needs; home bias factors, country indebtedness levels and economic vulnerability and limited institutional capacities.
- It also notes external factors affecting the financial sector’s ability to invest - limited local capital markets; unattractive risk-return profiles, in particular due to missing or weak regulatory environment; limited institutional capacity to ensure safeguards; standardization, aggregation, scalability and replicability of investment opportunities and financing models; and, a pipeline ready for commercial investments.
A positive finding is that the unit-costs of several key low-emission technologies has fallen continuously since 2010, a result of effective policy and investment decisions. However, innovation has lagged in the developing world.
ABI Analysis: Confirmation of a global consensus
For those who have followed climate change policy closely in recent years, this report is unlikely to carry any major surprises. Indeed, the technologies and mitigation strategies described all generally feature already in the UK Government’s Net Zero strategy and are issues we considered when developing our own Climate Roadmap.
However, where this report does bring something new is confirmation of a global consensus around the technologies and policies that will form the global efforts to reach the goals agreed at COP26. Even among those Governments whose emission reduction targets are less ambitious, there is a consensus around a set of actions and policy priorities.
That should give business leaders confidence that they are using their time well by focussing on how these changes will impact their businesses.
What also becomes clear as you read the report is that – although some technologies and policy proposals are more mature than others – we now largely have a full picture of what parts of the economy will be most impacted by the Net Zero transition. What is less clear is how to join-up decision making and ensure that the steps required all happen in the right sequence.
As an enabling sector that works across the various areas outlined in this report, there is an opportunity for Insurance and Long-Term Savings to demonstrate its societal value by supporting strategic decision making and co-ordination.
Furthermore, the report highlights that there is seemingly not an issue with the availability of capital and a willingness to invest (at least in the developed world), but there is an ongoing challenge deploying that investment effectively. This report adds further weight to the evidence base that suggests the link between mitigating climate change, reducing climate risk and driving social impact still needs to be better embedded in the decision making of Governments and financial regulators.