Advancing the Energy Transition
Earlier this year, the Intergovernmental Panel on Climate Change (IPCC) released a report, “The Mitigation of Climate Change,” to examine what can be done to limit and prevent human-generated emissions that cause global warming.
The IPCC report, now in its sixth cycle, is a comprehensive scientific assessment published every six to seven years. The fifth edition provided the main scientific input into the 2015 Paris Agreement, which commits countries to limiting the global average temperature to well below 2 degrees Celsius above preindustrial levels while aiming for 1.5 degrees Celsius.
While the 2022 IPCC report warns of the risks of crossing the 2 degree threshold, it also makes it clear that some progress has been made. Though in the last decade the average annual global greenhouse gas emissions (GHG) have been at their highest levels in history, the rate of growth has slowed, indicating evidence of success for such climate actions as electrification, alternative energy sources and improved energy efficiency.
BCIU hosts a range of programming focused on these sustainability and climate opportunities; two include initiatives with the United Nations Framework Convention on Climate Change (UNFCCC) and the U.S. Office for Special Presidential Envoy for Climate, John Kerry.
“BCIU is excited to offer programming dedicated to climate change, one of the most pressing challenges the world is facing,” says Brian Dershowitz, Senior Manager of Strategic Development at BCIU. “By bringing together important stakeholders from governments, the private sector, multilateral organizations and NGOs, BCIU is offering a platform to discuss how to collectively make progress on areas like the energy transition, decarbonization and ensuring there is the financing available for these opportunities.”
Limiting global warming will rely on significant transformations in the energy sector. Recently, BCIU held a virtual event called the Impact of Technology on Climate Financing and Achieving Sustainability Goals, which featured Mark Kroese, the General Manager for Sustainable Solutions at Microsoft. Here are some of the takeaways from the event, the challenges of solving complex global issues, and the opportunities embedded in those challenges.
The energy transition
GHG emissions continue to rise: Global emissions in 2019 were about 12% higher than in 2010 and 54% higher than in 1990. The transition to a low-carbon economy hinges on a wide range of closely intertwined drivers and constraints, including policies and technologies. Limiting warming will require rapid and deep reductions in energy system carbon and GHG emissions. As energy demands continue to rise, energy sector emissions are continuing to rise in tandem: According to the IPCC, approximately two-thirds of global GHG emissions can be attributed to carbon dioxide from fossil fuel combustion and industrial processes.
In order to keep warming to well below 2 degrees Celsius, there will need to be substantial energy system and infrastructure changes over the next 30 years. This includes reduced fossil fuel consumption, increased production from low- and zero-carbon energy sources, and increased use of electricity and alternative energy carriers.
“Climate finance I think makes up about a third of private equity today,” Kroese says. “The gaps are evolving at a macro level, but we still believe we need to mobilize more capital in order to meet the Paris Agreement goals.”
According to Kroese, the Microsoft Climate Innovation Fund looks at climate change as a $50 trillion investment opportunity, with a focus on distributed energy, clean fuels and engineered carbon removal.
Increasing capabilities of clean energy
Innovations and advances over the past decade have created new and large-scale opportunities for decarbonization, and for alternative development pathways that could deliver multiple social and developmental goals. Despite the rise of overall emissions from 2015 to 2019, global wind and solar PV capacity and generation have also increased rapidly: Solar photovoltaic (PV) grew by 170%, and wind grew by 70% from 2015 to 2019. Since 2010, there have been decreases of up to 85% in the costs of batteries and solar and wind power. Electric systems powered predominately by renewables will continue to be increasingly viable over the coming decades, but of course the transition will not be without challenges.
Technology will play an important role here, particularly in emerging markets, where the penetration rate of climate tech is low due to a lack of infrastructure.
“We make investments where developing economies and marginalized and underserved communities will benefit,” Kroese says. “We often see that there, technology has an outsized potential for impact but might be considered too risky for a lot of fund managers. So that is a place where we want to be.”
The congruence between climate and development means there needs to be a measured approach country by country—the energy grid, which is critical in determining the possibility of decarbonization, can look vastly different in each region. Despite these constraints, a low-carbon energy transition, one that utilizes multiple supply options, will shift investment patterns and create new economic opportunities within emerging markets.
Mitigation relies on collaboration
Climate change mitigation will rely on collective change from a number of different sectors, including business leaders. This means that strong partnerships between governments, the private sector, multilaterals, civil society and venture capital funds can unlock the potential of climate-friendly technology. There are numerous opportunities for buyer groups along the supply chain, for host and donor governments to work together in climate technology, and for distributed energy and traditional renewable energy investments on a large scale.
“The partnerships we have with governments around the world are actually closer and tighter than ever,” Kroese says. “I do feel like it’s an exciting time, where public and private are fundamental.”
Some may think that regulatory issues will be a challenge here, but today’s technology is causing a lot of change in the policy space—the government is not an impediment but rather a strategic partner for the private sector.
“It’s really gratifying to see how open a government is to having us as a technology company help them look around the corner and think about things that might need to change in the future,” Kroese says. “We have a point of view that may be unique or a little more forward thinking in certain areas. Whether that’s responsible AI, privacy or sustainability, there are all these crosscutting issues where I think the private sector has a role to play.”
The United Nations Climate Change Conference 2022, the 27th Conference of the Parties (COP27), will be held in Sharm El-Sheikh, Egypt, from November 7 through 18. To learn more about BCIU’s sustainability programming, visit our Events page.