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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. 4. Transition Management. 3 . Political Will. The end of BAU? 4 Perspectives. 1. Climate Science. 2 . Asset Valuation.

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The End of Business-As-Usual?

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  1. The End of Business-As-Usual? Dr. Johannes Meier European Climate Foundation

  2. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation 4. Transition Management 3. Political Will

  3. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation 4. Transition Management 3. Political Will

  4. The Skeptics

  5. 4 Types of Skeptics • Climate change is not happening • Humanity’s contribution to climate change is not significant • We cannot mitigate climate change effectively • It is too costly to mitigate climate change

  6. Climate Science Firming Up Image credit: James Lawrence Powell, MIT

  7. Pattern Shift: Global Warming, Rising Risks Source: climateactiontracker.org

  8. Pattern Shift: Global Warming, Rising Risks LOW-CARBON ECONOMY- Decarbonizing power- Resource efficiency- Smart cities- Forests/land use HIGH-CARBON ECONOMY “On track to 6 degrees” (IEA) Mitigation CHANGING RISK PATTERNS - Weather - Oceans - Food - Security - Health PAYING FOR CONSEQUENCES- High costs of delay of mitigation- Stranded assets - Tipping points Adaptation

  9. Insured Losses from Climate-Related Disasters, 1970-2011 Source: Swiss Re Source: Swiss Re

  10. If “Frankenstorm” is happening at 0.8°C warming, what might 3°C, 4°C, or 6°C warming bring?

  11. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation 4. Transition Management 3. Political Will

  12. Emissions Underlying Financial Flows Source: Carbon Tracker report: Unburnable Carbon 2013

  13. Stress Testing with Carbon Budgets Source: Carbon Tracker report: Unburnable Carbon 2013

  14. Carbon Budget Deficits for Listed Companies Potential listed reserves 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°Cbudget, we very quickly hit 2.5°C and 3°C Current listed reserves Source: Carbon Tracker report: Unburnable Carbon 2013

  15. Stranded Assets?

  16. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation 4. Transition Management 3. Political Will

  17. Key Uncertainty: Political Will

  18. 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 decarbonisation • Enhance understanding of the Energiewende and help stakeholders views to converge, thereby minimising space for vested interests

  19. The Council of Agora OttmarEdenhofen PIK Stefan Kapferer State Secretary Ministry of Economics Vera Brenzel Vice President Electricity E.ON Matthias Machnig (SPD) Minister for Economy Thuringia 28 Members Lucia Putrich (CDU) Minister for Environ-mentHesse 3 meetings so far 05-09-2012 21-11-2012 20-02-2013 Martin Iffert CEO Trimet Aluminium MechthildWörsdörferHead of UnitEC DG Energy Boris Schucht CEO 50Hertz JochenHohmann President Bundesnetzagentur

  20. The end of BAU?4 Perspectives 1. Climate Science 2. Asset Valuation 4. Transition Management 3. Political Will

  21. Where do we want/need to be in 2050, in 2030?

  22. Key Challenges for Transition Management • Feedstock price development • Shale gas, LNG • Unconventional oil • Economics • Market designs and subsidies • Internalisation of externalities (carbon taxes/carbon price) • Capital flow constraints • Technology development • Cost curves • Centralized & decentralized architectures • Convergence energy& IT systems • Public acceptance • Technologies • Infrastructure • Markets • Retail energy prices • Level and quality of market integration • National, EU, global • Gas, electricity markets • Flexibility/capacity markets

  23. A Framework for Transition Management • Desirable future • Competitiveness • Sustainability • EU2050 international role Backcasting • Balancing • Resilience • Optionality • Intelligence • Constraints • Installed base • Contracts • Business models • Mindsets Forecasting

  24. New Metrics for Dynamic, Complex, Unpredictable, and Risky Environments • Resilience • Optionality • Intelligence • Energy systems to withstand shocks (including worst-case scenarios in calculus) • Future proofing design and location 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 platforms Based on M. Liebreich: The new energy ROI

  25. ECF fundamental orientation • EU global leader in transition to low-carbon economy • Energy system led by RES • Industrial policies to address competitiveness challenge • Robust 2030 framework • Based on integrated EU • With effective carbon price, explicit carbon liabilities • High RES shares • Investments in energy efficiency, flexibility, transport system reform • Avoiding fossil-fuel lock-in • Sectoral differentiation • Innovation incentives • Easing transition costs

  26. The end of BAU! 1. Climate Science 2. Asset Valuation 4. Transition Management 3. Political Will

  27. Further Links Interpreting climate science and media reactions http://klimafakten.de/ http://www.carbonbrief.org/ Carbon bubble http://www.carbontracker.org/carbonbubble http://www.carbontracker.org/wp-content/uploads/downloads/2013/03/SnPCT-report-on-oil-sector-carbon-constraints_Mar0420133.pdf Political will http://ec.europa.eu/energy/index_en.htm http://www.agora-energiewende.de/ Transition management http://about.bnef.com/blog/liebreich-the-new-energy-roi-resilience-optionality-intelligence/ http://roadmap2050.eu/

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