Conventional wisdom holds that climate technology is entering its winter season, with political and investor interest and investment levels cooling, an ironic contrast to the climate itself, which has continued to deliver record warmth for years.
A new report from the International Energy Agency suggests there’s never been a better time to go all-in on climate change technology. Comparing the IEA’s stance ten years ago, it is clear that the world’s expectations for the future have changed dramatically in less than a generation.
In 2014, the International Energy Agency assumed that without international efforts to curb carbon pollution, emissions would continue to rise. Even the most optimistic forecasts at the time predicted a linear increase, with only a gradual slope. These scenarios essentially continue the trend lines of the past few years and extend them to 2050.
Fast forward to today, and the IEA’s current worst-case scenario is essentially the best-case scenario for 2014. Ten years ago, barring major changes, the world was on track to achieve 46 metric gigatonnes of CO2 per year by 2040. If countries cut emissions as promised, the best we could hope for was 38 metric gigatonnes of CO2 per year by 2040.
Currently, the IEA expects emissions to level off at 38 m gigatonnes per year if countries continue with business as usual. The IEA suggests that if countries follow through on their commitments, this could reach around 33 gigatonnes per year by 2040. Although this is still far from the amount needed to reach net zero by 2050, it is a significant change in a short period of time.
If the IEA’s earlier forecasts turned out to be overly pessimistic compared to current conditions, what does that mean about today’s forecasts?
How you answer this question depends on how you interpret the trend line.
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When predicting the future, do you analyze today’s data, or do you look at that data in conjunction with how our expectations for the future have changed over time? (For a more geeky perspective, do you view the world through the lens of algebra or calculus?)
Put another way, will the world reach net zero in 2050? Today’s trend lines suggest we will miss that goal by a wide margin. But a look at how expectations have changed over the past decade may provide a different answer. Rather, one might think that we are in the midst of an inflection point where the rate of change increases and global emissions begin to slope downward.
There are several recent anecdotes that support the idea that we are at a tipping point.
In Germany, electric car sales are setting new records even after the government abolishes incentives in 2023. Renewable energy is reshaping the economies of developing countries, long thought to be the last to adopt clean electricity. And China, which had previously refused to commit to reducing carbon emissions, now says emissions will peak by 2030.
The world’s view of the future of carbon emissions has changed significantly over the past decade. A variety of technologies have made this possible, including cheap solar and wind power combined with cheap batteries.
In the near future, geothermal energy and grid optimization software could provide another leap of optimism. For investors who buy into this, the upside could be dramatic.
For many climate change technology investors, these days are probably feeling pretty gloomy. But even in the darkness, there are still bright spots to be found.
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