Post COP 26 events reinforce IPR forecasts for 1.8C climate outcome
Ukraine impact - Security favours longer term energy transition over short term disruption
LONDON: 27/04/2022: 06:00 BST: COP 26 momentum and developments in China, Germany and France reflect slight positives in global climate ambition, with almost half of over one hundred policy developments assessed since COP 26 consistent with a 1.8C outcome according to findings of the 2022 Quarterly Forecast Tracker launched today by the Inevitable Policy Response (IPR).
Amongst key assessments, the war in Ukraine will ultimately favour clean energy outcomes with security an increasing energy transition driver despite a period of initial disruption. However recent US and Brazil developments signalled some stagnation or deceleration in momentum.
In a comprehensive distillation of over one hundred global climate policy and technology developments tracked from COP 26 to April 2022, fifty-three overall were found to be relevant to IPR forecasts, with forty-three confirmatory, reinforcing the probability of a 1.8C outcome, five indicating a slight acceleration towards a 1.5C outcome. Another four developments indicated some deceleration relative to forecasts.
The Quarterly Forecast Tracker (QFT) provides investors with a comprehensive and timely assessment on relevance, credibility and impact of key climate developments in 2022 against the IPR 1.8C Forecast Policy Scenario and 1.5C Required Policy Scenario, both released pre-COP 26.
QFT 1 Headline Findings
- Major events in late 2021 and developments in early 2022 have confirmed/reinforced IPR long term forecast impacts, with some signalling an acceleration in policy action
- This includes key developments and the emerging energy policy response to the war in Ukraine
- The war in Ukraine has led to policymakers to increase focus on ‘security’ as a driver and while short term there is some disruption, longer term developments are likely to favour clean energy
- There has also been some evidence of both signalling of an acceleration in policy ambition at the COP 26 and after in Germany, France, UK and China
- Also, some stagnation, weakening or deceleration of policy momentum in the US and Brazil
Ukraine Assessment Summary
- Reinforcement of medium (3-5 Years) and long term IPR renewable energy and green hydrogen policies and sector forecasts
- Short term (1-2 Years) energy supply crisis for EU with many uncertainties, local gas and coal use and sourcing of fossil fuel supplies outside of Russia which points at least short term to an “all of the above” approach. Implementing security back-ups could leave fossil fuels in the system longer.
- To achieve current IPR forecasts, it would require policy makers to avoid locking in actual generation or high-capacity utilisation of these fossil fuel assets.
- Energy security will come at a cost but there does not have to be a trade-off with climate policy.
Acceleration/Deceleration from IPR Forecasts
Major events in late 2021 and developments in early 2022 have confirmed/reinforced IPR long term forecast impacts, with some signaling an acceleration in policy action coming from COP 26, Germany, France, UK and China:
- At COP 26, over 100 countries including Brazil pledged to end deforestation by 2030, a stronger statement on forestry than in previous COP sessions
- Germany announced plans to bring forward coal phaseout timeline from 2038 to 2030,
- France is accelerating plans for clean power by announcing increased nuclear capacity, and the UK is exceeding its forecast IPR targets for EV deployment
- China has published new policy documents on greening the Belt and Road Initiative and has signalled an increased awareness of agricultural emissions, including mentioning of cultivated meat in its Five-Year Agricultural Plan (released in January).
There has also been some evidence of stagnation or deceleration of policy action that needs monitoring in the US and Brazil:
- In the U.S. new climate legislation has not yet passed, banned solar component imports could contract the sector and slow the adoption of renewables short term
- Court action against EPA could limit the ability to reduce power sector emissions absent federal legislation
- In Brazil, a proposed bill allowing mining on indigenous lands, combined with its recent NDC and high current deforestation levels could impact IPR forecasts for deforestation end dates
- The war in Ukraine has led to policymakers to increase focus on ‘security’ as a driver and while short term there is some disruption, longer term developments are likely to favor clean energy
David Atkin, CEO, Principles for Responsible Investment (PRI):
“The Quarterly Forecast Tracker is a new stage in the IPR mission to provide investors with a credible platform on which to assess the pace of climate policy and real economy acceleration. By measuring these issues against long term forecasts linked to temperature outcomes, investors are best placed to adjust their climate alignment, transition investment, risk and net zero strategies accordingly.”
Mark Fulton, Project Director, Inevitable Policy Response (IPR):
“With the climate transition well underway, quarterly assessments are an additional investor resource to benchmark climate progress. The QFT also allows pivotal events like the Ukraine war and its structural impacts to be progressively incorporated into the IPR outlook.”
For more information:
Inevitable Policy Response
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