Home » Low-Carbon Infrastructure Is the Future (Video)
Watch this video to find out why low-carbon infrastructure is the future and why we should invest in it.
The writing is on the wall for high-carbon infrastructure, according to the authors of a new report, “The Paris Effect – COP26 edition: How tipping points can accelerate and deliver a prosperous net zero economy”.
Low-carbon infrastructure is now cheaper, more efficient and a better long-term investment. A low-carbon economy will help the world to reach net zero emissions by 2050 and potentially avoid the worst consequences of climate change. This economy is also within reach if humanity acts to invest in low-carbon infrastructure.
Many economies are moving away from high-carbon infrastructure, and over 130 countries have committed to net zero targets, including Australia. But, critics say that Australia’s plan is not ambitious enough to rapidly reduce its emissions. Yet, according to the report, the international trend is that countries and industry will move towards low-carbon economies soon.
What does the report say?
The report was assembled by Systemiq, a company that partners with finance, policy-makers and civil society to find ways to make the world’s economic systems sustainable.
Globally, low-carbon solutions are now cost-competitive across the world’s electricity sector. Due to this, the world can expect disruption in many sectors. This includes aviation, shipping, trucking and more.
The report shows that it is no longer necessary or sensible to invest in new, carbon-intensive infrastructure. On the contrary, investing in this infrastructure is a risk, given that all major sectors are capable of developing green solutions and are poised to do so before 2030.
Why should the world invest in low-carbon infrastructure?
Global aims of slowing down global warming are urgent. The report’s authors point out that the world is quickly reaching a “climate tipping point”. Humanity must reduce emissions by seven per cent each year if we are to keep warming to 1.5°C below pre-industrial levels. Global temperatures are currently 1.2°C above pre-industrial levels.
High-carbon infrastructure is a bad investment
The report highlights several reasons why high-carbon infrastructure investments no longer make sense.
Long-life, high-carbon infrastructure assets are too commercially risky. This is the case for electricity, and road transport will soon follow suit. The gap between the capital cost for hydrocarbons and renewables has widened by 10 percentage points in the last five years.
Borrowing costs for long-cycle oil developments are now over 20 per cent. This is compared to borrowing costs for renewables, at three per cent to five per cent.
By 2040, and possibly sooner, the demand for high-carbon products will be in rapid decline. Governments and industry will seriously question the revenues from any high-carbon infrastructure built now in a decade’s time. For example, a gas pipeline where the costs are shared amongst customers will become more costly as customers move to low-carbon solutions.
Not only is the renewables sector delivering greater returns for investors, but it is also attracting more talent. The trend is evident in stock market returns. Major listed oil and gas companies generated negative shareholder returns of -18 per cent from 2017 to 2020. Meanwhile, major renewables companies generated positive returns of 30 per cent. The number of new patent filings for low-carbon technologies has increased 50 per cent between 2011 and 2021. But, the number of fossil fuel patents have dropped by 18 per cent since they peaked in 2015. The report’s authors say that this shows the “technical exhaustion” and “brain drain” from the sector.
What trends show us that the world is moving away from high-carbon infrastructure?
The report says that there has been a “fundamental shift” in public opinion over climate change in recent years. This has led to major political and legal shifts, says the report. About 73 per cent of people in G20 countries now believe that the Earth is approaching potentially irreversible climate change due to human behaviour.
In the US, 70 per cent of voters believe that corporations should do more to address global warming. There have been numerous other legal outcomes of this shift, such as a landmark court ruling ordering Shell to reduce its emissions. In addition, 131 countries have committed to achieving net zero emissions. This represents 73 per cent of the world’s emissions.
The report quotes the International Renewable Energy Agency (IRENA), which stated that in 2020, over 80 per cent of new electricity generation capacity in the world was renewable. This upsurge was mainly driven by developments in China, according to IRENA.
Also, building a net zero energy system would benefit the world hugely, economically. The report states that this transition would yield a net benefit of USD $26 trillion for the global economy.
How can we achieve a net zero economy?
The report states that in order to build a net zero, prosperous global economy, the world needs to “accelerate progress and engineer tipping points in six key systems”:
Decarbonise our energy supply. This means investing in renewable energy and storage, green hydrogen and sustainable shipping and aviation fuels.
Transform energy demand. This means creating energy-efficient buildings, plants, ships etc. Invest in green steel, cement and chemicals and well-designed cities.
Recapitalise nature. This means restoring degraded land, investing in alternative proteins to reduce pressure on land. It also means investing in regenerative agriculture, and financing tropical forests and other ecosystems.
Finance net zero growth in developing countries. This includes investing in public finance to cut the cost of capital and attract USD $1 trillion per year of private capital.
Put methane back in the bottle. This means tracking and finding solutions for oil and gas fugitive emissions, as well as waste and landfill solutions.
Remove carbon dioxide. This means finding solutions needed to remove six gigatonnes of carbon dioxide equivalent per year by 2030, and 10 gigatonnes of carbon dioxide equivalent by 2040.
Are we able to do this?
The good news is that society has the knowledge to implement these six steps, according to the report’s authors. Also, the Paris Agreement set in motion market dynamics, which resulted in “dramatic progress” in finding low-carbon solutions to the climate crisis.
In implementing these six steps, low-carbon solutions could scale up quickly. This could push down emissions in the sectors that account for 90 per cent of emissions by 2030.
How close are we to a low-carbon economy?
Humanity is doing well on some fronts but not so well on others. For example, globally, countries and industry are accelerating the development of renewables, plus storage, electric vehicles, plant-based meat and green steel.
But, regarding energy efficiency, heat pumps, developing country financing and natural or engineered carbon dioxide removals, humanity is “not moving nearly fast enough”.
Is it too late to limit global warming?
No, the report’s authors say. This is because of the dramatic progress in developing low-carbon solutions. Low-carbon solutions are now capable of out-competing high-carbon businesses. For example, low-carbon solutions are now cheaper than high-carbon ones in the electricity sector. The world needs to reach these “market tipping points” fast to reduce the amount of carbon in the atmosphere.
Nigel Topping, UN High Level Climate Action Champion for COP26, said this is underway in many sectors, but the world needs to do more work.
“The race to a healthy, resilient zero-emissions economy is already underway in many sectors – and it’s driven by the Paris Agreement’s goals. Whether in the electrification of transport, the decarbonisation of heavy industry or the disruption in capital markets – we are breaking through in ways not even imaginable a few years ago. But, as the Paris Effect – COP26 edition shows – we must pick up the pace by halving emissions and building resilience within the 2020s”, Topping said.
Is Australia aiming for a low-carbon economy?
Australia announced its net zero 2050 plan at the end of October 2021. While this was a welcome move by the Australian government, the plan falls short in many respects. Australia has introduced no emissions reductions policies, like tax incentives. The government made it clear that it will not force anyone to reduce their emissions. The plan has no funding, and it looks as though, by and large, Australia will stick to its current path. Australia will also not be legislating any reforms in the energy sector.
Without a firm commitment to moving away from high-carbon infrastructure, Australia risks being left behind by a rapidly decarbonising world.
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