Business, investors still ignoring 1.5°C climate target

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Many in financial and corporates sectors remain unaware of importance of 1.5°C target, or can’t gauge its relevance and apply it to business and investment.

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The inclusion of the 1.5°C objective in the final text of the Paris Agreement surprised many – despite years of scientific and diplomatic effort.

Yet, some 18 months on from the Paris Agreement being adopted, and several months since it entered into force, many in the financial and corporates sectors remain unaware of the importance of the target, or feel unable to gauge its relevance and apply it to business and investment.

Many businesses are becoming aware of the implications of the Paris Agreement, but only a few so far have formally acknowledged the 1.5°C limit that almost every country in the world has committed to pursue.

Research by TCI and KPMG, as part of our joint paper on corporate responses to the Paris Agreement, and engagement with businesses and investors leading up to the publication of TCI’s guide to the 1.5C objective, identified the following reasons for the reticence:

  • The target is unnecessary
  • It’s not achievable
  • Pushing for efforts in line with a 2°C future were
  • There’s no scenarios on it in the IPCC AR5 scenario database
  • There isn’t an International Energy Agency (IEA) scenario available

Let’s start with it being unnecessary. There is a perception that the 1.5°C is only of interest to low-lying island states and climate activists.

The 2°C warming limit, which is far more familiar to most, was identified back in the 1970s, and scientific understanding of climate change has evolved considering since then.

The UN Environment Programme Advisory Group on Greenhouse Gases (AGGG), the precursor to the IPCC, stated in 1990 that: “Temperature increases beyond 1 degree Celsius may elicit rapid, unpredictable and non-linear responses that could lead to extensive ecosystem damage.”

Almost three decades later, and with barely 1°C of annual global average warming, we are already experiencing effects of climate change that are in some cases devastating.

Some of these are catastrophic, like heatwaves, bushfires, floods and other disaster. The World Weather Attribution project and Climate Signals are two international scientist-led initiatives which identify the fingerprint of climate change in recent extreme events.

Recent research, for example, has indicated that the “angry summer” of 2012/13 in Australia will likely be considered relatively mild within two decades. The extreme temperatures of 2015 will become the “new normal’ by 2030 on the current emissions trajectory, and by 2040 under all emissions trajectories.

Others impacts to date of climate change are just below the surface.

Wheat farmers, for example, have managed to maintain productivity with technology and better practices, but their potential yield has stalled since 1990 due to climate change according to CSIRO.

Last year Climate Analytics conducted research into the difference between impacts at 1.5C and 2C of warming. Below is a summary of a few key findings, as described in our related policy brief:

climate policy breif

Is it possible – or just too hard?

The question of whether mitigations scenarios are achievable is perhaps less relevant than whether they are plausible. Even a few years ago, the plummeting costs of renewable energy were anticipated by very few experts, and the Paris Agreement itself surpassed most expectations.

Many people are surprised to find that 1.5C pathways are less dramatically different to 2C scenarios than they may have believed.

For example, CO2 emissions from the electricity sector are fairly extensive in a 2°C scenario, so there is not a great deal of difference to reach 1.5°C.

Another similarity is that most “likely” 2°C scenarios and 1.5°C scenarios rely upon negative emissions technologies.

As the table below shows, the significant difference is on the energy demand side, and in particular, in reducing emissions from buildings:

differences between degree scenarios

Table 1: Key differences between <2ºC and 1.5ºC scenarios. Approximate difference between scenarios that hold warming to below 2ºC (>66% probability) during entire 21st century and that return warming to below 1.5ºC by 2100. Based on mid-range scenarios. Low is defined as around a >25% increase in ambition, Moderate is defined as around a 26-100% increase in ambition, High is defined as greater than 100%.

It is possible for corporations and investors to begin thinking about 1.5C scenarios?

A key reason for the perception that 1.5°C can’t be considered by businesses and investors is that the IEA has yet to release a scenario for this objective that is fully comparable in detail to its Current Policies, New Policies, and 450 Scenarios. Yet even the 450 Scenario is not consistent with the Paris Agreement, as the IEA acknowledges. A more recent scenario developed by the IEA and the International Renewable Energy Agency (IRENA) examines a 55% percent change of limiting warming to 2°C, and further work is under way.

However, as we detailed in our paper with KPMG on corporate responses to the Paris Agreement, several companies have already conducted their own scenario analysis without relying upon the IEA.

And information exists to begin factoring in 1.5C scenarios to corporate and investor risk assessments.

Our guide for businesses and investors lines up peer-reviewed work on 1.5°C scenarios with assumptions and parameters contained within the technical supplement published by the Financial Stability Board’s Task force on Climate-related Disclosure (FSB-TCFD).

Some other business-accessible work exploring the key features of a 1.5°C scenario has also been published by Climate Analytics and Climate Action Tracker. These and similar projects establishing the feasibility of 1.5°C pathways have recently been reinforced by researchers from 14 European institutions developing a new generation of Integrated Assessment Models.

For those who want to get a bit more of a grip on the 1.5C objective, I highly recommend investing 45 minutes of your time watching this video of a lecture by Joeri Rogelj, who is a Coordinating Lead Author on the IPCC’s upcoming Special Report into the 1.5°C objective.

Kate Mackenzie is head of finance and investment at The Climate Institute.  TCI’s guide to the 1.5C objective for businesses and investors can be read here.

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3 Comments
  1. William Grace 2 years ago

    Important to note that the Paris agreement will only deliver 3.3C – not 2C as hoped and a long way from 1.5C which is, as outlined, less dangerous.

    https://www.climateinteractive.org/programs/scoreboard/

  2. Mark Roest 2 years ago

    The main benefits of the Paris Accord are creating a favorable political and economic regime for technologies which BOTH cut emissions AND are more profitable than bad technologies were before they started running aground. The psychological goal here is to get to a point at which conservative, backward-looking people recognize that new technologies give them an economic comfort level that replaces what they received when fossil fuels were hailed as the future. In other words, when renewable energy and energy efficiency are as profitable, and have as high a status in society, as fossil fuels did in most of the 20th century, then green can replace fossil in playing the dominant energy role in their lives. And the more green tech is supported and celebrated by the powerful in society, the sooner it will have achieved that goal for those looking to their past. The more costs come down and people switch to BEVs and clean electricity, the faster people will switch, which will drive the shift in outlook by those focused on power in their lives.

  3. Ray Miller 2 years ago

    Our buildings are our biggest threat to safety and energy infrastructure yet token efforts are being made in this space. Queensland (cheered on by the master builders) even subverts the national energy rating scheme for new dwellings allowing 1.5 star reduction from the minimum 6 stars for an outside living area and PV on roof. Guess what? Surprise many new houses are only really 4.5 stars or (below due to poor governance). Lack of action on our buildings has resulted in a cost transfer to the energy system (NEM) and the future, when extensive (read also expensive) retrofitting will be needed to achieve the carbon reductions the 1.5 aim requires. The reality of our housing in particular is likely to result is very significant reduction in asset value making many peoples life investment evaporate and leaving the banks with large debts.

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