- According to Argonne National Lab, 90% of all battery packs used in electric vehicles between 2010 and now were produced in the United States by Tesla and Panasonic. Not a huge surprise, given how Tesla has dominated the early EV market. The trend continues, however, with 70% of cells and 87% of packs produced here in 2020.
- China, India, Indonesia, Japan and Vietnam plan to build more than 600 coal power units. A risky move, given that 27% of existing coal plants are already uneconomic.
- “It’s warmer in parts of western Canada than in Dubai,” said David Phillips, senior climatologist for Environment Canada. Lytton, a small Canadian town in British Columbia at 50°13′52″N, became one of the hottest places on the planet last weekend. A town in Canada. Let that sink in.
- Here’s a novel idea from Harvard’s investment manager to allow short sellers to deduct carbon emissions associated with the companies that they’re shorting from their portfolios. Do we need an emissions market? Or could the financial markets do the job?
Yesterday, we saw The Investor Agenda call on government to step up with more comprehensive commitments to meeting Paris Accord climate change targets. The World Economic Forum’s CEO Alliance for Climate Change also issued a similar call for action. The CEO Alliance represents roughly 400 of the top 2000 publicly traded global companies. The letter, signed by 78 of the CEOs participating in this group, called on governments to deliver policy changes including:
- Publish new NDCs, aligned to a 1.5C target, and halving emissions by 2030.
- Commit to net-zero by 2050, with roadmaps to get there.
- Ensure that developed countries meet and exceed their $100B commitment to support developing countries mitigate and adapt to climate change.
- Develop broadly accepted carbon pricing mechanisms, with escalating carbon prices to drive the transition.
- Compel all business to establish credible decarbonization targets, and fully disclose all emissions.
- Eliminate fossil fuel subsidies, and cut tariffs on green goods.
- Boost R&D spending.
- Invest in climate adaptation. This means resilient cities and infrastructure.
- Create and implement sector-specific incentives for power, transport, buildings and cities, industry, land and agriculture, and finance.
It encompasses the same policy actions as the Investor Agenda open letter, and then takes them a step further asking government to provide incentives and R&D as well.
Both the Investor Agenda letter, and the CEO group letter ask for the elimination of fossil fuel subsidies, and for synchronized carbon pricing mechanisms to be introduced. What would this do?
- Direct fossil fuel consumption subsidies are substantial, according to the IEA, at about $320B annually. The incentives and R&D asked for could be funded by the elimination of these subsidies.
- Similarly, carbon pricing mechanisms send a signal to markets that low-carbon investments will be valuable and also create incentives for companies to be more efficient. Carbon pricing has momentum. According to the World Bank’s 2020 State of Carbon Pricing report, there are now 61 carbon pricing initiatives scheduled or implemented, and to-date some 14,500 projects registered. One challenge for business is the diversity of models. 30 of these initiatives are carbon taxes and 31 are carbon exchange trading systems.
Taken together, these two open letters are a strong endorsement by business. Rather than fight climate change efforts and regulation by government, they are calling for public/private partnerships to make progress more quickly.
The Investor Agenda is a policy advocacy organization with the mission of accelerating a net-zero emissions economy. Today 457 of their members with a combined $41 trillion in assets asked governments to do more than meet their Paris Agreement commitments. Specifically, they are asking government to:
- Strengthen their NDCs to align with a 1.5 C target for 2030. NDCs are simply the commitments that governments made at the Paris conference.
- Commit to mid-century (2050, presumably) net-zero emissions targets, and outline the interim steps to get there.
- Implement policies to deliver these targets, including phasing out fossil fuel subsidies, carbon trading systems and more.
- Use COVID-19 recovery plans to double down on the transition to net-zero.
- Commit to mandatory climate risk disclosure requirements.
One of the misunderstood stories of the climate transition is the opportunity in it. The capital and operation costs of both solar and wind power are now well below corresponding fossil fuel generation, creating massive opportunities for investment. You can see this in the financial performance of renewable assets as a class. These investors are saying “we have the capital to make help make this transition”. They’re asking governments to commit with them, to require disclosure of climate risk by business, and to remove the subsidies that artificially support the fossil fuel industry.
Transforming the global economy will be a hugely expensive, but hugely profitable opportunity. This is a relatively small, entirely understandable, and fair ask on the part of the investment community.