Energy Darwinism II - Why a Low Carbon Future Doesn't Have to Cost the Earth

Document summary

While fossil reserves aren’t running out, our ability to burn them without limit may be, due to the fact that atmospheric concentrations of CO2 and equivalents are rapidly approaching the so-called 'carbon budget' – the level that if we go beyond is likely to lead to global warming in excess of the important 2oC level.

It is this that makes the United Nations COP21 meeting in Paris in December 2015 so important; it represents the first real opportunity to reach a legally binding agreement to tackle emissions, given that all parties, including the big emitters, are coming to the table with positive intentions, against a backdrop of an improving global economy.

In this report, we examine the likely costs of inaction in terms of the potential liabilities from climate change to see whether we can afford not to act. We also examine whether the world can afford to act, by comparing the incremental costs of following a low carbon path to global GDP.

Overall, we find that the incremental costs of action are limited (and indeed ultimately lead to savings), offer reasonable returns on investment, and should not have too detrimental an effect on global growth. Nevertheless, our energy choices will have a profound impact on countries, industries and companies, and we examine the implications of a low carbon future in terms of the stranded assets that are likely to result. Finally, we examine the solutions that financial markets and institutions can offer to facilitate this transition to a lower carbon world.