As Saudi Arabia and Iran wage a proxy war over oil prices which threaten to destabilise global markets it may come as a relief to know that our addiction to the fossil fuels controlled by volatile regimes with appalling human rights records will one day be over.
For the first time in history almost every country has formally agreed to decarbonise the global economy by the second half of this century, paving the way for a world powered by new and renewable forms of energy rather than fossil fuels.
As the Daily Telegraph’s Assistant Editor, Philip Johnston, wrote, the arguments about the science of global warming are “pretty pointless now. We are going to move to a lower-carbon future whether it is needed or not, because 150 countries have pledged in Paris to reduce fossil fuel demand by up to 40 per cent over the next 20 years. The direction of travel is clear and irreversible.”
Following Saturday’s landmark decision in Paris, the stock price of Peabody Energy, the world’s largest privately owned coal company, fell 13% to $7 a share, quite a feat for a company which has already lost 95% of its value since February when people were buying stocks for $129 each. This comes on the heels of the New York attorney-general’s office, which last month found that Peabody misled the public and investors about the financial risks to its business associated with climate change. A similar investigation into Exxon-Mobil is ongoing. Amber Rudd, the UK’s Energy and Climate Change Secretary, saw the writing on the wall before Paris and announced most coal burning would be phased out in the UK by 2023 and a complete stop by 2025.
It is a truism that the essential fact about capitalism is creative destruction. But although there are necessarily losers when any industry gets overtaken, the Paris Agreement will unleash a wave of investment in renewable energy companies. On Monday as fossil fuel stocks dipped, renewables went up. Goldman Sachs reports that wind turbine manufacturers, electric car company Tesla Motors, solar panel group SolarEdge and lithium battery supplier Albermarle will all benefit from the Paris deal.
In fact the Telegraph’s International Business Editor, Ambrose Evans-Pritchard predicted this new wave of technological investment might even turn around a stuttering global economy. He noted it could “unleash a $30 trillion blitz of investment on new technology and renewable energy by 2040, creating vast riches for those in the vanguard and potentially lifting the global economy out of its slow-growth trap.”
Such investment has started to flow in the form of announcements from India and the African Union of major commitments to wind and solar energy within the next decade. What makes the Paris deal significant is that it’s not just an empty, top-down, UN statement but actually built from the bottom-up, consisting of national policy plans submitted by each country – everyone from the USA, China and India to Ethiopia and the Marshall Islands.
These plans will bend the curve of rising temperatures from the current business-as-usual trajectory of more than five degrees, to somewhere around 2.7 degrees. In order to reach the figure agreed in Paris of “well below 2 degrees” with an eye to reaching 1.5, countries will now review these commitments every 5 years starting in 2018. Paris will not be the end of this low carbon transition: it is just the beginning.
At the rate the cost of renewable energy is falling, countries are likely to be in a position to make even stronger moves into low carbon in three years’ time. Barclay’s Mark Lewis explains: “The average cost of global solar was $400 a megawatt/hour worldwide in 2010. It fell to $130 in 2014 and now it has fallen below $60 in the best locations. Almost nobody could have imagined this six years ago.” In fact the fall is so fast it’s made even Greenpeace’s predictions look conservative.
In two ways Britain can claim to have shown significant global leadership on this issue. Britain’s Climate Change Act was the most pioneering climate legislation in the world with its commitment to reduce UK emissions by at least 80% from a 1990 baseline by 2050. Now the rest of the world has followed that lead in Paris. The UK is already reaping the benefit of that early adoption by boasting one of the world’s most sophisticated low carbon industries, which employs a million people and is the fastest growing sector of the British economy according to the Department of Business’ own figures.
As an aside, it’s a shame this growth industry, which would be well placed to capitalise on the coming wave of international low carbon investment, risks being cut away at the knees by the Government’s confused policies on renewables which has drawn criticism from within its own ranks. In the light of the Paris agreement, these policies appear not only short-sighted, but backward-looking. They were conceived on the basis of a world dragging its feet on climate change, in which the UK felt ambitious policies left it exposed to a competitive disadvantage. That assumption has been proved wrong – but will the politicians have the humility to admit it?
In his excellent Telegraph article, Philip Johnston pointed out the second area of British leadership: “The first leading world politician to draw attention to the possibility that industrialisation may be contributing to rising temperatures was not some superannuated Trot or Scandinavian eco-warrior. It was Margaret Thatcher.”
In a prophetic 1989 speech the former Conservative Prime Minister called for the creation of the UN body which met last week in Paris. She said: “The evidence is there. The damage is being done. What do we, the international community, do about it? In some areas, the action required is primarily for individual nations or groups of nations to take…but the problem of global climate change is one that effects us all and action will only be effective if it is taken at the international level.”
The international community has finally heeded her words. The transition to a low carbon economy is underway.