Delivering the Paris Agreement ‘a $275trn investment opportunity’, asset owners tell policymakers

The call to action, made to coincide with the UN General Assembly and Climate Week NYC, is included in a new briefing paper warning that “key political barriers” are now the biggest challenge to the net-zero transition.

According to the Alliance’s paper, transitioning to net-zero by mid-century along the Paris Agreement’s 1.5C trajectory would present an investment opportunity of up to $275trn.

On the contrary, failure to deliver either of the Paris Agreement’s trajectories could result in losses of up to $6trn for global asset owners by 2050. Current national policy commitments are aligned with at least a 2.6C trajectory by most estimates.

The report reiterates the assertions of climate scientists that most of the decarbonisation technologies and solutions we need to achieve 1.5C are already “mature and cost-effective”. These include industrial energy efficiency solutions, building energy efficiency measures, wind, solar and public transportation.

It notes that challenges relating to the roll-out of these technologies often has to do with regulations rather than legislation. In the UK and other European markets, for example, major renewables projects face lengthy delays in connecting to the grid. Also in the UK, onshore wind was, until recently, effectively banned.

Elsewhere, the adoption of electric cars and vans is being hampered by a lack of charging infrastructure. The Alliance’s paper recommends that nations consider bolstering plans for developing supply chains and skills bases while unblocking planning-related barriers to deployment.

Emerging technologies

According to the paper, technologies that are already mature and cost-effective could deliver 45% of the emissions reductions needed in a 1.5C scenario through to 2050.

The remainder would need to be delivered through behavioural changes and investment in solutions which are currently not as mature – including options for capturing and storing emissions as well as abating them in the first instance.

Included in this category in the report are green hydrogen, alternative aviation fuels and carbon capture, usage and storage (CCUS).

The paper outlines how governments should have a role to play in funding, or co-funding, the development of early-stage technologies to reduce risk perceptions and crowd in private investment. It cites the US’s Inflation Reduction Act as a strong example of best practice but says the approach could and should be “introduced or expanded in numerous markets”. The Act includes billions of dollars in production tax credits and subsidies; other nations may lean towards direct funding.

Also mentioned as crucial are new mandatory technology standards like the UK’s forthcoming emissions standards for low-carbon hydrogen, which can prevent higher-carbon solutions being badged as ‘green’ and urge innovators to show ambition.

Policymakers will only be sending clear signals on these technologies, the paper warns, if they reduce funding for their fossil-fuel-based predecessors at the same time.

They also need to send clear, long-term signals on the general direction of travel – for example, by setting fixed time-bound grid decarbonisation targets and end-dates for the sale of new petrol and diesel cars. Such targets give industries in transition more certainty. They also provide a credible starting point for the development of plans to scale supply chains and skilled worker bases.

Net-Zero Asset Owner Alliance chair Günther Thallinger said: As we have learned from advanced climate solutions, such as renewable energy and vehicle electrification, advantageous policy environments are a key enabler of uptake. Public subsidies and incentives for electric vehicles, for example, doubled from 2021 to 2022 to about $30bn globally, and we’re seeing similar trajectories for renewable energy and heat pumps.

“We must see these approaches replicated to similarly drive emergent technologies, such as green hydrogen and sustainable aviation fuels, without which it will be impossible to reach net zero given the scale of the transition.

“Asset owners have a huge role to play, with potential contributions up to $31trn by 2050, but only by removing current investment barriers will we be able to unlock the full potential of private capital.”

It bears noting that the Alliance does not allow its members to count emissions removals towards their net-zero accounting at the moment. Instead, they are compelled to prioritise carbon reductions, delivered in a socially just manner.

Climate Ambition Summit

The publication of the paper comes a day after the UN hosted its first Climate Ambition Summit in New York.

This summit was first tabled by UN Secretary-General Antonio Guterres last year, in an attempt to get nations to submit “new, credible” plans for delivering their fair share of the Paris Agreement. At each UN Climate COP, many nations fail to update their plans ahead of time. Moreover, as already noted, current plans are not aligned with either of the Agreement’s temperature pathways.

Only a select number of world leaders were able to speak at the summit. They needed to evidence that they are not “backsliding, greenwashing, blame-shifting or repackaging announcements from previous years”.

Speakers included representatives from Brazil, Canada, France and the EU 27. Those barred from speaking included China, the US and the UK.

UK Prime Minister Rishi Sunak has marked this week by displaying rhetoric and action contrary to that on display in New York. On Tuesday afternoon (20 September), he announced a weakening of policies relating to electric vehicles, energy efficiency and clean heating, stating that he was doing so to save homeowners money in the near-term.