Six years ago, when an international climate treaty in Copenhagen seemed distinctly possible, there was still a discernible gap between the concept of a low-carbon global economy and the capital market’s ability to deliver it. Nascent and costly clean energy technologies, skepticism of climate science and a still deeply-embedded reliance on coal and oil in nations from the US to China were just a few of the reasons CEOs were resistant to change.
But business attitudes have shifted. And it comes at a critical time, with the International Energy Agency estimating that the world must invest at least an additional $1 trillion per year – a Clean Trillion – into clean energy if we are to avoid the worst impacts of climate change on our environment and the economy. Companies and investors are showing unprecedented resolve in embracing clean energy and eschewing business-as-usual reliance on fossil fuels – especially coal. They’re also clamoring more loudly for strong climate policies, including a tangible price on carbon pollution. It’s a powerful signal that policymakers should consider as momentum grows for reaching a strong climate deal in Paris late this year.
So what has changed since 2009?
- Businesses accept that climate change is happening and that it’s impacting their bottom lines. Even Big Oil CEOs acknowledge it, including Shell CEO Ben van Beurden who remarked in February, “Yes, climate change is real. And yes, renewable energy is an indispensable part of the future energy mix.”
- Renewable energy is achieving cost competitiveness with fossil fuels. The cost of solar photovoltaic power has plunged the past few years and utility-scale PV projects in the West are competitive in cost and size even with natural gas plants. Among those seizing the opportunity is Apple, which is building an $850 million solar farm in California to power its operations.
- Even with oil prices falling to $50 a barrel, observers like the Wall Street Journal say renewable energy is here to stay. “From cheaper solar panels to more-efficient wind turbines to smaller nuclear reactors, these alternatives are more economically competitive,” WSJ’s Jeffrey Ball wrote recently. “… and there’s little reason to think they’ll make a U-Turn now.”
- Investors are waking up to the risks of fossil fuels, especially coal and oil. A big focus is the oil industry’s wasteful spending on developing new fossil fuel reserves when global oil demand is weakening and carbon-reducing trends are taking stronger hold. In a stunning analysis, Goldman Sachs found nearly $1 trillion of oil projects at risk of being “stranded” due to shrinking demand and plummeting oil prices. Topping its “zombie project” list are risky and expensive Arctic drilling and Canada’s oil sands.
- Coal is in a slow death spiral. Plummeting global demand has coal sales – and the value of coal companies, especially US coal companies – dropping like, well, a sack of coal. Companies such as 160-year-old Consol Energy are moving away from coal and investing in natural gas. Even China, the world’s biggest coal consumer, is taking aggressive steps to rein in its coal use.
- Technology breakthroughs continue to happen, including in energy storage, a key cog in catalyzing large-scale renewable energy. Southern California Edison recently announced more than 260 megawatts of energy storage contracts – five times more than it expected in its solicitation.
- Companies are advocating publicly for strong policies to reduce carbon pollution, including state-level renewable portfolio standards, EPA efforts to reduce power plant pollution, and a strong international climate agreement. More than 200 companies signed a letter supporting EPA’s Clean Power Plan, including industry giants such as Kellogg’s, IKEA, VF Corp., Unilever, Mars, and Nestle. More than 1,300 companies have signed Ceres’ Climate Declaration.
- Investors are also clamoring for climate action. Last fall, nearly 350 investors managing $24 trillion in assets called on government leaders to adopt meaningful carbon pricing, an ambitious climate accord, and an end to fossil fuel subsidies. “The perception prevails that we need to choose between economic well being or climate stability,” the investors wrote. “The truth is that we need both.”
The tide is clearly turning towards a low-carbon future and hopefully government leaders are paying attention. It’s critical for elected officials to heed these clear signals and recognize the urgency and economic imperative of taking action to address climate change.