Surge in public concern over climate change and spike in electric vehicle sales, but fossil fuel investment remains a headache
The world’s future climate prospects have brightened marginally since the start of the year thanks to accelerating electric vehicle sales and a surge in public concern over global warming.
That’s according to new analysis published today by investment giant Schroders, whose Climate Dashboard forecasting tool tipped the global long-run temperature rise at 3.8C based on the outlook from the first quarter of the year.
This is down 0.1C from 3.9C in the last quarter of 2018, suggesting a marginally less doom-laden future ahead.
The Dashboard launched in 2017 with the aim of providing Schroders’ analysts, fund managers and clients with a “birds-eye view” of the speed and scale of climate action. It compares projections made by international organisations across a range of categories, from renewables to political ambition and corporate planning, to estimate the temperature change implied by the current progress seen in each area.
Schroders said today it has revised its prediction of temperature rise downwards thanks in large part to a breathtaking uptick in electric vehicle sales.
In January, global sales of electric vehicles almost doubled, driven by an almost tripling of sales in China where plug-in cars now account for almost five per cent of passenger car sales. Over the entire first quarter, global EV sales rose by around 80 per cent compared to the same period a year earlier. Such strong growth puts global electric vehicle sales on a pathway towards the penetration levels observed in a 2.9C scenario, according to Schroders.
Meanwhile, a surge in public concern over climate change is also having a positive impact on temperature trends, Schroders said. This year’s annual Gallup poll of the US public found 65 per cent of respondents worry “a great deal” or a “fair amount” about climate change, a rise of two percentage points on last year.
A similar shift in public sentiment is underway in the UK in the wake of school strikes, warnings from Sir David Attenborough, and the Extinction Rebellion forecasts, with polling released last week by BMG Research suggesting 59 per cent of voters would back a UK net zero emissions target for 2050, with just eight per cent opposing. Meanwhile official BEIS polling earlier this month found found that concern about climate change is at its highest level since the polling series began in 2013.
According to Schroders, this “barometer of public concern” acts as a precursor to tougher political action on carbon emissions.
Nevertheless, the investment giant was quick to sound a note of caution. The direction of travel may be positive, but the pace is “pedestrian” relative to the sprint needed to meet the commitments leaders made in Paris to limit temperature rises to 2C, noted Andrew Howard, head of sustainable research at Schroders.
Of particular concern is the rising capital investment in the oil and gas sector, which is now close to eight per cent of industry assets, and would lead to production growth at the pace needed for a long run temperature rise close to 5C, according to Schroders.
“The major headwind lay in the rising capital investment of the global oil and gas sector,” confirmed Howard. “We questioned last year whether producers would restrain capital investment as prices and cash flows improve, demonstrating deliberate rather than enforced discipline, or would investment escalate as it has in past cycles? The jury remains out.”
Schroders’ assessment echoes with the findings from the latest International Energy Agency (IEA) report released today, which reveals that upstream spending on oil and gas rose by nearly four per cent in 2018 to hit $477bn, thanks to rising oil prices and a shift to shale gas. Meanwhile, investment in coal jumped two per cent to $80bn, although this was concentrated on maintaining existing plants rather than new projects, the IEA said.
The paper also warned of few signs of a large reallocation of capital towards low-carbon energy. In fact, investment in energy efficiency and renewables stalled in 2018, the IEA said, with the former remaining flat and the latter falling by one per cent to around $300bn.
The figures don’t bode well for the future, with the 2019 World Energy Investment report predicting a further rise in spending on oil and gas this year to $505bn.
The findings signal a “growing mismatch” between current trends and the paths to meeting the Paris Agreement and other sustainable development goals, the IEA warned. “Energy investments now face unprecedented uncertainties, with shifts in markets, policies and technologies,” said Dr Fatih Birol, the IEA’s executive director. “But the bottom line is that the world is not investing enough in traditional elements of supply to maintain today’s consumption patterns, nor is it investing enough in cleaner energy technologies to change course. Whichever way you look, we are storing up risks for the future.”
In many ways, both the IEA and Schroders analysis represent two sides of the same coin. On the one hand, work is underway to green the energy system. Coal investment may have risen slightly last year, but it is still way down on its peak at the beginning of the decade. Both reports cite the extraordinary rise in electric vehicle sales in recent months. Billions of dollars is still flowing into renewables each year. But none of this is happening anywhere near fast enough to meet the goals of the Paris Agreement.
A 0.1 degree drop in temperature is important, but it doesn’t escape from the fact we are still heading for 3.8 degrees of warming, a level that all but guarantees environmental catastrophe.