Sliced: Feeling the Heat
Gordian Knot Strategies
We are Igniting Climate Solutions: Mobilizing $1 Billion Per Year in Impact Investment by 2030!
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January 2024 was the hottest January ever recorded on planet Earth.
This is according to a new report recently published by Copernicus, Europe’s Earth observation agency.
Add that on top of the fact that 2023 was the hottest year on record.
One more layer – January was the eighth consecutive month that broke global temperature records.
Oh, wait, one more layer – 2024 is predicted to be even hotter, with “a reasonable chance of being the first year temporarily exceeding 1.5°C.”
It is official; we are now feeling the heat. The thermostat has been turned up. We, and our addiction to burning fossil fuels, are the cause.
Copernicus’ deputy director Samantha Burgess bluntly stated what we need to do to turn the thermostat back down: “Rapid reductions in greenhouse gas (GHG) emissions are the only way to stop global temperatures increasing.”
Global GHG emissions must be reduced by at least 43% by 2030 to cap the average temperature increase at 1.5°C. Without significant changes, the current trajectory is set to lead to a ~3°C temperature increase by the century's end.
The thing is that we are not up a creek without a paddle. Our toolbelt is already filled with ways to reduce GHG emissions. To name a few – renewable energy, energy efficiency, electrification of transportation, halting deforestation, afforestation and reforestation, sustainable agriculture, and methane management.?
We also know the price tag for turning down the heat.
According to the Climate Policy Initiative, the yearly requirement for climate finance will be between $8.1 and $9 trillion by 2030. Beyond 2031, the annual amount is expected to grow, topping $10 trillion annually. At last year’s G20 summit, it was recognized that developing countries need $5.9 trillion before 2030 to fulfill their Nationally Determined Contributions (NDCs) under the Paris Agreement. Additionally, to achieve net-zero GHG emissions by 2050, these countries will require an annual investment of $4 trillion in clean energy technologies by 2030.
In the long run, BloombergNEF estimates that a total of $200 trillion is required between now and 2050 to both mitigate and adapt to climate change. CPI projects that we need about $266 trillion. McKinsey forecasts $275 trillion.
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So how are we doing?
BloombergNEF reported last month, that global investment in the clean-energy transition reached $1.8 trillion in 2023, a new high. This included spending on renewable energy installations, electric vehicle purchases, hydrogen production systems, and other technologies. When accounting for the expansion of clean-energy supply chains and an additional $900 billion in financing, total funding in 2023 amounted to approximately $2.8 trillion.
Despite the record level, the spending still falls short of the targets needed to achieve net-zero emissions by about nearly $6 trillion (using a conservative calculation).
Swiss Re projected that unchecked global warming could result in a $23 trillion annual reduction in global GDP. In that scenario, the US economy could shrink by 7%, and other developed economies might see a contraction of up to 10% compared to a scenario with more moderate temperatures.
According to an estimate by the nonprofit Central Banks and Supervisors Network for Greening the Financial System, the total cost impact between now and 2100 could reach $2.3 quadrillion. That $200 trillion BloombergNEF estimate mentioned earlier is only 8.7% of that potential cost by the end of the century.
This stark comparison underscores the value of investing now: spending a fraction today on mitigation and adaptation could prevent catastrophic economic losses later. Essentially, the upfront investment in climate action is not just a cost but a critical savings measure, protecting economies and societies from far greater expenses and irreversible damages in the future.
While a warm January might seem pleasant on the surface, the unsettling reality behind the unseasonable warmth stresses the urgency of mobilizing financial resources to address climate change.
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